Written by Maryam Ajorloo, CPA · Reviewed by Behdad Karimi Dermeni, CPA
The domain renewed, the business card was in your other wallet, and you paid with your personal Visa. Now the charge sits on your personal statement and appears nowhere in your company's books. Almost every incorporated owner does this at some point in their first year, and the fix is one account you may not have met yet.
The short answer: Due to Shareholder is a liability account on your corporation's balance sheet that tracks what the company owes you. When you pay a business expense from your own pocket, record the expense in its normal category and credit Due to Shareholder for the same amount. Repaying you later is not taxable income.
If you would rather your books caught these automatically than chase them at year-end, that is exactly what an AI bookkeeper is for. See how ReInvestWealth handles it.
What "Due to Shareholder" actually means
Your corporation is a separate legal person from you. It has its own bank account, its own tax return (the T2), and its own set of books. So when your money and its money mix, which happens constantly in a one or two person company, somebody has to keep score.
Due to Shareholder is the scorecard. It is a liability, which means it sits on the right-hand side of the balance sheet next to things like credit cards and loans, because it represents money the company owes to someone else. That someone else is you.
You will see the same idea under several names, and they all mean the same thing:
Due to Shareholder (the account name most bookkeeping software uses)
Shareholder loan (what your accountant and the Canada Revenue Agency (CRA) call it)
Shareholder loan credit balance (what it is called when the balance is in your favour)
It sounds like a formal lending arrangement with yourself, complete with paperwork. In practice it is closer to an IOU on the fridge: a running tally of who is up and who is down, settled whenever it suits both of you. The company does not have to pay you interest, and there is no deadline to clear the balance.
The one rule that sorts out every shareholder transaction
Before the detail, here is the principle that covers all of it:
> If you paid a business cost out of your own pocket, the company owes you. If you took company money for something personal, you owe the company. The first one is harmless. The second one has a deadline.
That is the whole thing. Most of the anxiety around shareholder loans comes from guides that treat both directions as one scary topic. They are not the same. One is ordinary bookkeeping. The other has a rule in the Income Tax Act attached to it, and we will get to it.
Due to shareholder vs due from shareholder
Same account, opposite directions. Which one you are looking at depends entirely on which way the money went.
Due to Shareholder (a liability): the company owes you. Created when you pay a business expense personally, put your own cash into the business, or lend it money to cover payroll. Nothing taxable happens to you, and there is no repayment deadline.
Due from Shareholder (an asset): you owe the company. Created when you withdraw company cash that is not salary or a dividend, or when the company pays a personal cost of yours. This is the direction with tax consequences.
Most bookkeeping software runs both through a single account and simply lets the balance swing positive or negative, which is why the number sometimes appears in brackets. Brackets are not an error message. They are telling you the balance flipped direction.
The practical takeaway: a growing Due to Shareholder balance is usually a sign you have been funding the business personally, and it means the company can pay you back tax-free whenever it has the cash. A growing Due from Shareholder balance is the one to watch.
How to record a business expense you paid personally
Five steps. They work the same whether you are in ReInvestWealth, a spreadsheet, or your accountant's software, because the underlying bookkeeping does not change.
Keep the actual receipt, not the statement line. Your personal credit card statement proves you spent money at a supplier. It does not prove what you bought or how much GST/HST was on it, and the CRA can ask for both. Photograph the receipt or forward the email confirmation the day it happens.
Record the expense in its normal category. A $340 software subscription is a software expense, full stop. It does not become a special kind of expense because of which card paid for it. This is the step people skip, and skipping it means the deduction never reaches your T2. Not sure which category it belongs in? Our guide to small business write-offs in Canada covers the main ones.
Credit Due to Shareholder for the same amount, not cash. The company did not spend any cash, so no bank or credit card balance should move. What changed is that it now owes you $340. In double-entry terms: debit the expense, credit Due to Shareholder.
Split out the personal portion first. If it is a mixed cost, like a cell phone bill you use for both, only the business share belongs in the books. Claim the business percentage and leave the rest out entirely. Guessing high here is an easy way to lose the whole claim if the CRA ever looks.
Check the balance at month-end. Your Due to Shareholder balance should equal the total you have personally funded and not yet been repaid. If you can explain the number in one sentence, your books are clean. If you cannot, something landed in the wrong account.
The mistake that quietly overstates your profit
This one is worth its own section because it is the most common way a set of otherwise tidy books goes wrong, and it is nearly invisible.
When you enter a personally paid expense manually, most software defaults the other side of the entry to a cash account rather than Due to Shareholder. The expense looks right. The category looks right. But the company's books now show cash going out that never left any real account.
Two things break at once. Your balance sheet grows a cash line that drifts negative, sometimes by thousands, and your income statement reports a profit that is not quite real. One business owner came to us with 36 entries totalling about $5,700 sitting in the wrong account for a full year. Nothing looked broken from the dashboard. It only surfaced when the balance sheet refused to make sense.
The diagnostic takes ten seconds: pull up your balance sheet and look for a negative cash or "manual transactions" balance. Real bank accounts do not go negative without an overdraft. If one has, those entries were funded by you, and the credit belongs in Due to Shareholder instead.
Can you claim the GST/HST you paid personally?
Yes, and almost nobody writing about shareholder loans mentions it, which means a lot of Canadian owners are leaving real money with the government.
If your corporation is registered for GST/HST, it can generally recover the sales tax on a business expense even when you paid with a personal card. The mechanism is a deeming rule: where you buy something for the company's activities and the company reimburses you, the tax rules treat the company as having made the purchase and paid the tax itself, so it can claim the input tax credit. The claim is limited to the portion reimbursed and the portion actually used for business, so the same business-use split from step 4 applies here.
Two things determine whether that credit survives a review, and both are about paperwork rather than tax law:
The receipt has to carry the right details. Under the CRA's documentation rules the requirements scale with the amount: under $100 you need the supplier's name, the date, and the total. At $100 or more you also need the supplier's GST/HST registration number. At $500 or more you need the recipient's name, the terms of payment, and a description clear enough to identify what was bought. Worth knowing: these thresholds were raised in 2021, and a surprising number of Canadian accounting guides still print the old $30 and $150 figures.
Use the right tax for your province. Ontario, New Brunswick, Nova Scotia, Newfoundland and Labrador, and Prince Edward Island charge HST. British Columbia, Saskatchewan, and Manitoba charge GST plus a provincial sales tax. Quebec charges GST plus QST, filed with Revenu Québec. Alberta charges GST only. Provincial sales tax in BC, Saskatchewan, and Manitoba is generally not recoverable the way GST/HST is, so do not lump it in.
Miss the receipt and you keep the income tax deduction but lose the sales tax credit. On a year of software subscriptions and client lunches, that adds up to a number you would notice.
This is the sort of thing that should happen without you thinking about it. ReInvestWealth's Smart Shoebox (your receipt inbox) takes photos or forwarded emails, reads the GST/HST off each receipt, and matches it to the transaction, so the paperwork is already there when you file. See how it works.
Paying yourself back
Once the company owes you, collecting is refreshingly boring. Transfer the money from the business account to your personal account and record it against Due to Shareholder. The balance goes down. Nothing else happens.
Specifically, nothing tax-related happens. The company is settling a debt, not paying you income, so a repayment does not go on a T4 or a T5 and does not appear on your personal return. You already paid for those expenses with money you had been taxed on once. Getting it back is not a second taxable event.
A few practical notes:
You can repay yourself in pieces whenever the business has cash. There is no schedule and no minimum.
Move the money as an actual bank transfer. A repayment that exists only as a journal entry is harder to support later, and real bank movement takes the argument off the table.
Do not label it as a draw, a dividend, or "owner pay" in your books. Those are different transactions with different tax treatment, and mislabelling turns a tax-free repayment into a reporting problem.
If you are choosing between clearing the balance and paying yourself properly for the work you do, those are two separate decisions. Our guide to salary vs dividends in Canada covers the second one, and the salary vs dividend calculator will run the numbers for your situation.
When you owe the company: the one-year rule
Now the other direction, and the reason shareholder loans have a reputation.
If you take money out of your corporation that is not salary, not a dividend, and not a repayment of what it owes you, the Income Tax Act treats it as a loan to you. Subsection 15(2) says that loan gets included in your personal income for the year you received it. Not the year you were supposed to repay it. The year you took it.
There is an escape hatch, and it is generous if you know the shape of it. Subsection 15(2.6) turns the inclusion off if the loan is repaid within one year after the end of the corporation's taxation year in which it arose, provided the repayment was not part of a series of loans and repayments.
Read that deadline carefully, because it is not one year from the day you borrowed. It runs from the corporation's year-end. If your fiscal year ends December 31 and you take $20,000 out in February 2026, the clock runs to December 31, 2027, which is nearly two years. Take the same $20,000 out in December 2026 and you have twelve months. Same amount, same company, wildly different runway.
Two more things worth knowing before you rely on this:
The series rule has teeth. Repaying on December 30 and borrowing again on January 3 is exactly the pattern the "series of loans and repayments" wording exists to catch. The repayment needs to be real, not a lap around the calendar.
Interest-free is not quite free. Where you have a loan from your corporation, a deemed interest benefit is calculated at the CRA's prescribed rate, which is reset every quarter, and reduced by any interest you actually pay within 30 days of year-end. It is a small number next to the 15(2) inclusion, but it does show up.
A handful of narrow exceptions exist for genuine employee loans, such as buying a home, buying a motor vehicle for work, or buying treasury shares. They only apply where the loan was made because of your employment rather than your shareholdings, and where real repayment arrangements were set up at the time. For a solo owner who is also the only shareholder, that is a harder case to make than it sounds, so treat these as an accountant conversation rather than a plan.
None of this should make you nervous about paying for a client lunch on the wrong card. That is the other direction, and it is fine. The full details are in the CRA's income tax folio on shareholder loans and debts.
If you are not incorporated
Worth a pause here, because most guides on this topic quietly assume you have a corporation, and plenty of readers do not.
If you run a sole proprietorship or you are self-employed, there is no shareholder, no shareholder loan, and no subsection 15(2) to worry about. You and the business are the same taxpayer. When you pay a business expense from your personal account, you record the expense and claim it on your T2125, and that is the end of the story. Money you move between your business and personal accounts is a contribution or a draw, not a loan, and it is not a taxable event either way.
The habit still matters, though. The expense only reduces your tax if it is actually in your books, and the receipt rules are identical. If you are not sure which structure you are in or whether to change it, corporation vs self-employed in Canada walks through the difference.
Three habits that keep the account clean
Use the business card by default. Due to Shareholder exists for the times you cannot, not as a routine. Every personally paid expense is a manual entry someone has to make and later explain.
Capture the receipt the moment you pay. Not Sunday, not April. A photo takes four seconds and it is the only thing that protects both the deduction and the GST/HST credit. Our guide to tracking business expenses has the full routine.
Review the balance every month, and keep six years of backup. The CRA generally expects you to keep records for six years from the end of the last tax year they relate to, and a shareholder account is exactly the kind of thing that gets questions. It is also worth knowing how far back the CRA can audit a business so the six years feels less arbitrary.
Or you could stop doing the manual part. Connect your bank and your cards, forward the odd personal receipt into Smart Shoebox, and let the AI Bookkeeper sort the categories while you get on with the business. Built by CPAs, rated 4.8 on Capterra, and used by 3,000+ entrepreneurs who have better uses for a Sunday. Start free for 30 days.
Frequently asked questions
Is Due to Shareholder an asset or a liability?
It is a liability. Due to Shareholder means the company owes you, so it appears with the company's other obligations on the balance sheet. The mirror image, Due from Shareholder, means you owe the company and appears as an asset. Whether it is classified as current or long-term depends on the repayment terms, and most small corporations show it as current.
Do I have to charge my corporation interest on money I lend it?
No. There is no requirement to charge interest on money you put into your own company, and most owners do not. If you do charge interest, it becomes taxable interest income on your personal return and a deduction for the corporation, which usually complicates more than it saves.
Is repaying a shareholder loan taxable income?
Not when the company is repaying you. It is settling a debt, so nothing goes on a T4 or T5 and nothing appears on your personal return. The taxable direction is the opposite one: money you take out of the corporation that is not salary, a dividend, or a repayment can be included in your income under subsection 15(2) if it is not repaid in time.
Can I claim the GST/HST on a business expense I paid with my personal card?
Generally yes, if your corporation is registered. The tax rules treat a reimbursed purchase as if the company bought it, so the company can claim the input tax credit for the business-use portion. You need the actual receipt showing the tax, and once the total hits $100 it also has to show the supplier's GST/HST registration number.
Where does Due to Shareholder go on the T2?
It is reported on the balance sheet schedule that accompanies the T2 return, mapped to the GIFI code your accountant uses for amounts owing to shareholders. You do not report it as income or an expense anywhere, because it is a balance the company carries, not something that happened during the year.
Ready to stop tracking this on the honour system? Connect your bank, forward your receipts, and let the AI categorize the transactions so your shareholder balance is right every month instead of every April. Start for free.
A note from our CPAs: This guide is educational and covers the general rules for Canadian small business owners. Shareholder loan situations vary a lot with your year-end, your pay structure, and what else is in the account, so for advice on your specific circumstances talk to your accountant. (If they use ReInvestWealth, they will already have clean books to work from.)
Written by Maryam Ajorloo, CPA
> Maryam Ajorloo is the co-founder of ReInvestWealth and a CPA who specializes in small business tax, sales tax, and everyday bookkeeping. She helps entrepreneurs keep clean, audit-ready books and make sense of write-offs, filing deadlines, and the numbers behind their business. Read more · Connect on LinkedIn
Reviewed by Behdad Karimi Dermeni, CPA
> Co-founder of ReInvestWealth and a founding community builder at Stripe. Behdad built ReInvestWealth to give smart, busy entrepreneurs CPA-level accounting without the CPA-level price tag. Read more · Connect on LinkedIn