Should I Incorporate? Calculator

Should I Incorporate? Tax Calculator

Most people who ask whether to incorporate are really asking one thing: "how much of my profit do I actually need to live on?" If the answer is "all of it," a corporation mostly adds an accountant's bill. If it's "about half," the numbers get interesting. The calculator above runs both versions with your numbers and shows its math.

What the Numbers Mean

Result	What it tells you
Difference this year	Cash in your hand plus money left in the company, compared with a sole proprietor's after-tax profit. Positive means the corporation leaves more working for you this year
Sole proprietor: tax + CPP	Income tax on all the profit plus both halves of CPP
Corporation: all tax now	Corporate tax plus your personal tax (and CPP, if salary) on what you take out
Left in the company	After-tax profit the corporation keeps. This is where the deferral lives
If all paid out now	The difference if the company paid out everything as dividends this year. Close to zero means the tax system's integration is doing its job

Ontario Examples, 2026

Owner takes $70,000 a year as dividends; the corporation costs $3,000 a year to run.

Business profit	Sole proprietor tax + CPP	Corporation, all tax this year	Left in the company	Difference this year	If all paid out now
$80,000	$22,126	$14,267	$0	+$4,860	+$4,860
$120,000	$34,774	$19,076	$33,896	+$12,698	+$4,651
$200,000	$70,458	$28,036	$104,936	+$39,422	+$4,129
$300,000	$121,355	$39,236	$193,736	+$79,119	+$3,849

Look at the last column. Paid out in full, the corporation is ahead by about $4,000 to $5,000 a year, and nearly all of that is CPP not paid on dividends. The rest of the "saving" in the middle column is tax postponed, not tax avoided. Switch the calculator to salary and the last column drops to roughly zero: at $120,000 of profit, about -$330; at $200,000, about -$230, with CPP and RRSP room built.

When Incorporating Usually Pays

• Profit is well above what you need to live on, year after year.
• The money left in the company will be reinvested in the business or invested for years.
• You expect lower-income years later (retirement, a sabbatical) to take money out at lower rates.
• You may sell the business: shares of a qualifying small business corporation can use the $1.25 million lifetime capital gains exemption; see holding companies.

It usually doesn't when you need nearly all the profit personally, when the business is new and may lose money, or when you're a one-client contractor who looks like an employee; see personal services business. The full comparison is on corporation vs sole proprietorship.

How the Calculator Works

1. Sole proprietor: income tax on the full profit as self-employment income, plus both halves of CPP.
2. Corporation: deducts the yearly cost, then pays you either non-eligible dividends or salary. Salary is set so that salary plus the employer's CPP equals what you take out, and assumes no EI (owners with more than 40% of the voting shares are generally excluded).
3. Corporate tax: federal 9% plus the provincial small business rate on the first $500,000, then the general rates. Nova Scotia, PEI and Saskatchewan's higher provincial limits are applied. Rates are on corporate tax rates.
4. Personal tax on dividends: the 15% gross-up and the federal and provincial dividend tax credits for 2026.

Every figure is in "Show the math" under the result. The tradeoffs between paying yourself salary and dividends are covered on salary vs dividends.

Professional help

Want a tax professional to look at it?

Tell us the situation in a few lines. If it needs a professional, we connect you with a vetted Canadian tax preparer, accountant or tax lawyer who handles exactly this. No charge to ask.

Name

Email

ProvinceABBCMBNBNLNSNTNUONPEQCSKYT

Roughly how much is at stake?Under $2,000$2,000 to $10,000$10,000 to $50,000Over $50,000Not sure

What is going on?

You may share this with one tax professional who may contact me about it.

Ask for a professional

What the Calculator Leaves Out

• Investment income the corporation earns on retained profit, and the passive income limit; see small business deduction.
• Splitting income with family members, which the tax on split income usually blocks for dividends.
• One-time costs of incorporating and transferring assets.
• Credits beyond the basic ones, the Ontario low-income reductions, and benefits such as the Canada child benefit that change with net income.
• Ontario's lower dividend tax credit from 2027, which raises personal tax on non-eligible dividends by a little over 1% of the dividend.

Not incorporated and want to know what to set aside instead? Use the self-employed tax calculator. The basics of corporate tax are on Canadian corporate tax explained.

Other Calculators

Should I Incorporate Questions

Sources: CRA, Corporation tax rates; CRA, Completing the T5 slip; Ontario, Ontario dividend tax credit; TaxTips.ca, Provincial dividend tax credit rates. Checked October 2026. Examples come from the calculator's 2026 rules engine; we checked its top dividend rates against published figures for Ontario, BC, Alberta, Manitoba, Saskatchewan and New Brunswick. Provincial dividend tax credit rates other than Ontario's come from TaxTips.ca rather than each province directly. Ontario's 2.2% rate applies from July 1, 2026; Newfoundland and Labrador's 2% rate is from its 2026 budget. The $30,000 to $50,000 rule of thumb is ours, not CRA's.

Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.