The consequences depend on the circumstances. If the company owes you money because you have previously lent it money or you converted your unincorporated business to corporate status resulting in a loan payable to you, you may withdraw the funds without attracting income tax. If this is not the case, you generally have two options and if you are not careful may get caught paying double tax. You may simply record the payments as dividends in your corporate records and report the dividends on your personal tax return in the year received. You may also repay the funds to the corporation. The repayment must be made within a year of your corporate year end. If you fail to repay the funds within the required time, you will be taxed on the funds when received at your full marginal tax rate. In addition, the corporation will not get a deduction for wages expense, thus the double taxation effect. There are instances where money can be taken out of a corporation via loans for automobile purchases and home purchases, but they are quite restricted.
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