Adding Minor Children as a Sharholder or to Payroll
Kristi Allan
Business owners often ask about adding their minor children as shareholders and paying them dividends. This is not recommended.
There are legal implications, and more importantly, it triggers the Tax on Split Income (TOSI) which means dividends to minor children are taxed at the highest marginal rate, eliminating any potential tax savings.
TOSI Overview
Who it applies to:
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Children under 18 at the end of the tax year.
What income is affected:
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Dividends from private corporations
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Income from trusts or partnerships tied to a related person’s business
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Certain shareholder benefits
Tax treatment:
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Income subject to TOSI is taxed at the top rate, regardless of the child’s other income.
Common mistake:
Paying dividends to a minor child via shares held directly or through a family trust.
Better Alternative: Hire Your Teen
Paying your child through payroll is a more tax-efficient option and the first $16,129 of income in 2025 is tax-free federally.
But there are rules:
Age Guidelines:-
Under 12: Very limited tasks (e.g. light office help, supervised social media).
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Ages 12–14: Admin, marketing support, deliveries, etc.
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Ages 15–17: Broader roles allowed, as long as the work and pay are reasonable.
Alberta:
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$13/hr for students under 18 (first 28 hrs/week during school).
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$15/hr beyond 28 hrs/week or during school breaks.
Ontario (as of Oct 1, 2024):
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$16.20/hr for students under 18 (28 hrs/week or less during school, or during breaks).
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$17.20/hr if exceeding 28 hrs/week.
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Homeworkers must be paid at least $18.90/hr (rising to $19.35 on Oct 1, 2025).
Proceed With Caution
If CRA finds the work or pay unreasonable, they can:
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Deny the deduction
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Reassess and apply penalties or interest
Always consult your CPA (not just your bookkeeper) before moving forward. They’re the ones who will deal with CRA if questioned.
Bottom Line
Yes, you can put your child on payroll at any age if:
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The work is legitimate and age-appropriate
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The pay is reasonable
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You document everything properly and treat them like any other employee
A checklist is attached to help you get started.
Speak with your CPA before taking action. This is not tax or legal advice just a general guide to help you understand your options.