Setting up Salary, Expenses, and Savings for the Corporation

You'll first want to add the corporation to your projection following the steps in this article: Adding a corporation.

Once you've added the corporation to the projection, there is typically one of two cases that will apply.

If you know how much your client is earning, spending, and distributing from the corporation, you can enter these details and assume the retained earnings are saved within the corporation.

Alternatively, if you know exactly how much the client is contributing to their investments each year you can model these details and disregard other considerations of the corporation if desired.

1

Corporate Income, Salaries, and Expense Details are known

If you know the corporation's Business Income and Deductible and Non-Deductible Expenses, as well as the details for Salaries being paid out, you can enter these values and Snap will contribute any remaining surplus (after taxes are paid) to the available Financial Assets each year. If no Financial Assets have been entered, or if there are contribution overrides on these accounts, the surplus will be contributed to the Cash Balance.    

On the Corporate Planning page, enter the Business Income, the Salary of the client (if applicable), and All Expenses (including Non-Deductible Expenses). Non-Deductible Expenses are part of the All Expenses amount, not added to it. Make sure that these expenses are reflected properly in your projections. Click the blue dollar value under the applicable column to open the pop-up data entry window. 

The Financial Assets Value has automatic contributions made to it and will grow every year by any cash surplus and the growth of the account based on the asset allocation and rate of return of the portfolio. Click Scenario Setup -> Assets and/or Scenario Setup -> Settings -> Portfolio to make adjustments to the Financial Assets and Portfolio settings.  

If you enter a specific value in the Contribution column, this is called an override and the cell will be highlighted yellow. If the Contribution is less than the available surplus cash as shown below, there will be a positive Net Cash Flow that will be saved to the Cash BalanceTo avoid the Cash Balance building up, clear the overrides on the Contribution column.

If you declare a salary for the Client, you'll see this salary on the personal Planning page in the Corporations section.

Note: A corporation can simultaneously declare a salary and a dividend.

2

Corporate Income, Salaries, and Expense Details are unknown (Savings per year are known)

Alternatively, if you know the annual savings made to the Corporate Financial Assets, you can include or omit entries for Active Business Income, All ExpensesSalary, etc., and enter the expected annual Contributions to the corporation under the Contribution/Withdrawal column.

Snap will calculate the Net Cash Flow each year by adding the Contribution to the Total Tax and will display a negative Net Cash Flow. By default, this negative Net Cash Flow is funded by borrowing from the Cash Balance, which tracks the cumulative surplus or shortfall in the corporation. To stop Snap from funding the Net Cash Flow by borrowing from the Cash Balance, you can change the settings available on the Scenario Setup -> Settings -> Cash Balance page.

Most often, in these cases, the client is funding the Contribution and paying the Total Tax from the operating business income that's occurring outside of Snap. As a result, we typically want to ignore these shortfalls until the operating business stops, often in the year of retirement (in this case 2029).

You can access the Advanced Options on the Scenario Setup -> Settings -> Cash Balance page by clicking Show.

Then you can start to Accumulate cash flow shortfalls in the year of retirement (2029 in this case).

Snap will then present the Net Cash Flow on the corporate Planning pages, but it will not borrow from the Cash Balance. Therefore, you'll have transparency of how much cash flow the corporation in Snap requires from outside operations, without those shortfalls impacting the projection.

If you are modelling other income to the corporation, and there is surplus cash flow that you don't want to add to the Cash Balance, you can change the Accumulate cash flow surpluses from year to the year in the projection that the surpluses end.

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