Skip to content
Contact us
  • There are no suggestions because the search field is empty.

How to Record a Shareholder Contribution

A shareholder contribution is money a shareholder puts into the corporation from personal funds. It's not revenue and it's not a loan — it increases equity. Here's how to record it correctly.

A shareholder contribution is money that a shareholder puts into the corporation out of personal funds — to fund operations, cover a cash shortfall, or capitalize the business. It's not revenue, and it's not a loan. It increases the company's equity.

What You'll Need

  • Access to QuickBooks Online
  • The amount contributed and the date
  • Confirmation of how the contribution is structured (share capital or shareholder loan — see below)

Two Ways to Contribute Capital

Before recording anything, confirm with your Mesa CPA advisor how the contribution should be classified:

Option 1: Share capital (paid-in capital)

The shareholder receives additional shares in exchange for the contribution. This is a permanent equity investment — the company doesn't owe it back.


Option 2: Shareholder loan (credit balance)

The shareholder lends money to the corporation. The company owes it back. This is a liability (the corporation owes the shareholder), not permanent equity. See: How to Record a Shareholder Loan.

For small contributions and day-to-day funding, shareholder loans are more common because they're simpler and reversible. For significant capitalization, issuing shares may be more appropriate. Your Mesa CPA advisor will recommend the right approach.


Normal Procedure

Recording a Share Capital Contribution

  1. The contribution arrives in the business bank account (via deposit from your personal account).
  2. Go to Transactions > Bank transactions and find the deposit in the For review tab.
  3. In the Category field, select the Share Capital equity account (or ask your Mesa CPA bookkeeper to confirm the correct account name for your QBO setup).
  4. Save.

The cash is now in the business account and the equity section shows the shareholder's invested capital.


Recording a Shareholder Loan (Money Lent to the Corporation)

  1. Find the deposit in the bank feed.
  2. In the Category field, select the Shareholder Loan liability account.
  3. Save.

This records the cash in the business and creates a liability — the company owes the shareholder.


Abnormal Procedures

You've contributed money over time without documenting whether it's equity or a loan.

This is common with early-stage businesses where the owner funds everything personally. Work with your Mesa CPA advisor to review the history and decide the right classification. Undocumented contributions can create tax issues (e.g., if the company later returns the money, the CRA may treat it as a dividend).


Multiple shareholders are contributing different amounts.

Each shareholder's contribution should be tracked separately and linked to their share ownership. If contributions are unequal, confirm with your Mesa CPA advisor whether this affects the share structure or creates any shareholder agreement obligations.


You want to contribute equipment or other property instead of cash.

Non-cash contributions are recorded at the fair market value of the asset. The asset is recorded on the Balance Sheet, and share capital increases by the same amount. This is a more complex transaction — your Mesa CPA advisor should oversee it.


FAQ

Is a shareholder contribution taxable to the corporation?

No. Contributions of capital to a corporation are not income to the corporation — they increase equity.


Can I get my contribution back?

If it was recorded as a shareholder loan: yes, the corporation can repay you when it has the cash. If it was recorded as share capital: not without formally redeeming shares, which involves corporate procedures and potential tax implications.


Does contributing money to the corporation affect my personal taxes?

Generally no — contributing after-tax personal money to your corporation is not a personal tax event. When you eventually get the money back (as dividends or on sale of the company), there may be personal tax implications. Your Mesa CPA advisor handles this in long-term planning.


What's the minimum amount I need to contribute to incorporate?

For most Canadian incorporations, you can issue shares for as little as $1 in stated capital. The practical amount you contribute depends on how much working capital the business needs. There's no legal minimum beyond the stated capital of the shares issued.