Should I Incorporate? Ontario Calculator

Incorporating saves tax now only when your business earns more than you need to live on. Profit you leave in an Ontario corporation is taxed at 11.2% instead of your personal rate, which can be above 40%. Profit you take out is taxed again on your personal return. Enter your profit and the salary you need to compare a sole proprietorship with a corporation.

Sole proprietor or corporation?

Example figures are filled in. Replace them with your own.

Your business

Business profit for the year$Salary you would take from the corporation$What you need to live on. The rest stays in the company.Extra yearly cost of running a corporation$Accounting, the T2 return and filings. Use the written quote you are given.

Your estimate

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General information using 2026 rates, not tax advice for your situation.

How this calculator compares the two

1. Sole proprietor. All of the profit is your personal income. You pay income tax on it and both halves of CPP, because there is no employer to pay the other half.
2. Corporation. The company pays you the salary you choose and the employer half of CPP on it. You pay personal tax and the employee half of CPP on the salary. What is left in the company is taxed at the small business rate, 11.2% in Ontario for tax years after 30 June 2026.
3. Running costs. A corporation costs more to run: a T2 return each year, an Ontario annual return, payroll and more bookkeeping. Enter the yearly cost you are quoted.
4. The difference. The calculator adds what you keep personally and what stays in the company, and compares it with what a sole proprietor keeps.

Deferral, not a permanent saving

Most of the advantage is a tax deferral. When you later pay the money out to yourself as a dividend, it is taxed on your personal return, with a dividend tax credit for the corporate tax already paid. The longer the money stays in the company, and the more it earns there, the more the deferral is worth. If you need every dollar the business earns to live on, incorporating usually saves little or nothing, and the extra costs can make it worse.

Reasons to incorporate besides tax

• Limited liability for business debts, although banks often ask owners for personal guarantees.
• Income splitting with family members who work in the business or own shares, within the tax on split income rules.
• The lifetime capital gains exemption if you sell qualifying shares of the company one day.
• Retained profit for buying equipment or property, paying down debt or investing inside the company.

Professionals such as doctors and dentists incorporate as professional corporations under their college's rules. The same comparison applies. See accounting for doctors.

What this estimate leaves out

• Dividends instead of salary. The calculator pays you salary. Dividends change the CPP and personal tax picture; our guide on salary, bonus or dividend explains the trade-offs.
• Personal credits and deductions other than the basic personal amount and CPP, and the Ontario low-income tax reduction.
• EI. An owner who controls more than 40% of the voting shares usually cannot pay into or claim EI on their salary, so the calculator leaves it out.

Common questions

At what income should I incorporate in Ontario?

There is no single number. Incorporating starts to pay when your business profit is comfortably more than what you need to take out each year, so that a meaningful amount can stay in the company at the small business rate. Run the calculator with your own profit and spending.

Does incorporating lower my taxes?

It lowers the tax on profit you leave in the company, for as long as it stays there. On money you take out, the total tax ends up close to what a sole proprietor would pay. Running costs reduce the benefit.

Can I incorporate an existing sole proprietorship?

Yes. Business assets can usually be moved into the new company without tax on the transfer using a section 85 rollover, which needs a tax election filed with the CRA.

See our incorporation service, the corporate tax calculator and all of our calculators.

General information using 2026 federal and Ontario rates. It is not tax advice for your situation. Wealthy Wave Accounting agrees the scope and fees for any work in writing before it starts.