One of the biggest perks of running your own incorporated business is flexibility — especially when it comes to paying yourself. But that flexibility can also create confusion.
These are great questions. How you pay yourself doesn’t just affect your take-home pay today. It impacts your taxes, retirement savings, cash flow and long-term financial plan.
The good news? This decision is one of the best opportunities for incorporated business owners to save taxes. And while there’s no one-size-fits-all answer, understanding the basics will help you make smarter choices.
VIDEO: Curtis at True North Accounting explains why this decision is one of the best opportunities to save taxes as an entrepreneur.
As an incorporated business owner in Canada, your corporation is a separate legal entity. That means:
Many owners accidentally create tax problems by taking casual “draws” from the business without a plan. Others miss out on major tax savings because they default to one method without understanding the trade-offs.
That’s why this choice deserves a bit of thought — and ideally, some professional guidance.
Click the image above for a close-up of this infographic.
This article is especially helpful if you are:
When it comes to paying yourself from your corporation, you generally have two options:
Let’s break each one down.
Dividends are paid to you as a shareholder, not as an employee. They come from profits the corporation has already earned.
Here’s how dividends work:
From an admin perspective, dividends are relatively simple. Many owners take draws throughout the year, total them up, and issue a T5 slip by February 28.
Personal taxes on dividends are due by April 30.
💡 Good to know: If dividends are your only source of income, you can earn roughly $30,000 tax-free, depending on your province and personal situation.
Paying yourself wages means you are treated as an employee of your corporation.
This can be done through regular payroll or as a year-end bonus.
Here’s what wages look like:
CPP contributions currently total 11.9%, split evenly between employer and employee, with a maximum annual contribution of $4,230.45 each.
Payroll remittances must be sent to CRA by the 15th of the following month, which adds a bit more administration.
💡 Good to know: Paying yourself a salary helps build retirement savings through CPP and RRSPs, which many owners value for long-term security.
Many business owners assume dividends are always cheaper because they’re taxed at lower personal rates. But once you factor in corporate taxes, the difference often narrows — and in some cases, wages can result in similar or even lower overall tax.
The real trade-off usually looks like this:
There’s no universally “better” option — just the option that best fits your goals.
In certain situations, there may be additional strategies available, including:
These strategies require careful planning and proper documentation — but when used correctly, they can be powerful tools.
For many incorporated business owners, the optimal strategy isn’t choosing one option — it’s combining salary and dividends.
A blended approach can:
This is where personalized advice really pays off.
Deciding how to pay yourself isn’t just a tax decision — it’s a business and life decision.
At True North Accounting, our CPAs will:
We’ll also simplify your bookkeeping, payroll and tax filings so you can focus on what you do best — running and growing your business.
📅 Ready to make the most of your income?
Book a chat with us today and let’s build a pay strategy that works for you — now and into the future.
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