Taxes, payroll and business
Should I incorporate?
Compare sole proprietorship and incorporation with the same profit and personal cash needs.
2026 corporate tax and contributions · Personal tax uses your assumptions
Your business
$3,500 is an example: enter actual additional annual costs over sole proprietorship, fully deductible in this simulation. Initial incorporation costs are excluded.
30% and 20% are editable examples. Enter average federal + provincial rates after contribution-related credits and deductions, but excluding CPP/QPP and QPIP contributions. The dividend rate applies to cash received, already accounting for gross-up and credits. Other income affects these rates; no personal tax return is calculated.
Future withdrawal is simulated as dividends at your rate, without returns, inflation or discounting. This rate is an assumption, not a tax forecast.
Corporate assumptions
Canadian CCPC eligible for active business rates, one establishment, dividends-only compensation. Adjust limits for sharing, reductions and short years; Quebec SBD defaults to 0%. The sole proprietor is fully subject to CPP/QPP and Quebec QPIP, with no other earned income. Excludes optional EI, personal health contributions, prescription insurance, passive income and personal services businesses.
Your result
Difference in funds available today
$18,658.42
Corporation minus sole proprietorship
- Remaining personal funds · sole proprietor
- $35,707.10
- Cash retained · company
- $54,365.52
Cash retained in the company belongs to the company. The current capital difference includes tax deferral and different contributions; it is not permanent personal tax savings.
After the simulated future withdrawal
- Future tax · assumption
- $10,873.10
- Personal funds · corporation
- $43,492.42
- Personal difference after withdrawal
- $7,785.32
Future withdrawal is simulated as dividends at your rate, without returns, inflation or discounting. This rate is an assumption, not a tax forecast.
Same personal cash need
- Cash needed
- $60,000.00
- Received · sole proprietor
- $60,000.00
- Received · corporation
- $60,000.00
Self-employed contributions include both CPP/QPP shares. Dividends create no RRSP room or pension contributions: cash differences do not measure lost benefits. Also compare salary using Salary vs dividends.
| Comparison | Sole proprietor | Corporation · dividends |
|---|---|---|
| Profit before tax | $150,000.00 | $150,000.00 |
| Additional costs | $0.00 | $3,500.00 |
| Business / corporate income tax | $45,000.00 | $17,134.48 |
| CPP/QPP + QPIP contributions | $9,292.90 | $0.00 |
| Gross dividends distributed | $0.00 | $75,000.00 |
| Dividend tax · assumption | $0.00 | $15,000.00 |
| Personal cash received | $60,000.00 | $60,000.00 |
| Unfunded personal cash needs | $0.00 | $0.00 |
| Funds remaining today | $35,707.10 | $54,365.52 |
| Simulated future tax | $0.00 | $10,873.10 |
| Personal funds after future withdrawal | $35,707.10 | $43,492.42 |
Other decision factors
The decision also depends on liability, personal guarantees, administration costs and your time horizon. Family income splitting and sale exemptions have conditions: neither benefit is assumed here. This comparison does not automatically recommend a legal structure.
Method and sources
The sole proprietor pays personal tax on all profit, then contributions and personal needs. The company deducts additional costs, pays corporate tax and distributes the smallest gross dividend meeting the same net need. Remaining cash stays in the company; a future withdrawal then applies your assumed tax.
30% and 20% are editable examples. Enter average federal + provincial rates after contribution-related credits and deductions, but excluding CPP/QPP and QPIP contributions. The dividend rate applies to cash received, already accounting for gross-up and credits. Other income affects these rates; no personal tax return is calculated.
Canadian CCPC eligible for active business rates, one establishment, dividends-only compensation. Adjust limits for sharing, reductions and short years; Quebec SBD defaults to 0%. The sole proprietor is fully subject to CPP/QPP and Quebec QPIP, with no other earned income. Excludes optional EI, personal health contributions, prescription insurance, passive income and personal services businesses.
Cash retained in the company belongs to the company. The current capital difference includes tax deferral and different contributions; it is not permanent personal tax savings.
Future withdrawal is simulated as dividends at your rate, without returns, inflation or discounting. This rate is an assumption, not a tax forecast.
Self-employed contributions include both CPP/QPP shares. Dividends create no RRSP room or pension contributions: cash differences do not measure lost benefits. Also compare salary using Salary vs dividends.
ARC · Impôt société / CRA · Corporate rates
Ontario · Corporate income tax