Should You Incorporate? Sole Proprietor vs Corporation Calculator (Canada)

Net business income (after expenses)

How much of it could STAY in the corporation each year?

Province

Annual corp costs (accountant, T2 filing, registered agent)

The Québec trap: Québec's small-business rate requires 5,500+ paid employee hours a year — roughly three full-time employees. A solo corporation doesn't qualify and pays Québec's general 11.5% rate, so the combined rate below is 20.5%, not ~12%. Most incorporation calculators miss this entirely.

One main client? Read this first. If you incorporate but work like an employee for a single client (their hours, their tools, no other clients), the CRA can classify the corporation as a Personal Services Business: no small-business rate, a 33% federal rate plus provincial general rate (about 44.5% in Ontario), and almost no deductible expenses. The deferral below assumes you are NOT a PSB.

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your marginal rate on the next $1,000 (tax + CPP where applicable, from our verified engine)

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combined small-business corporate rate

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deferral per retained dollar

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gross deferral on your retained amount, per year

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net of your annual corp costs

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minimum you'd need to retain each year just to cover corp costs

FAQ

What income level makes incorporation worth it?

There's no magic number — it's about retention, not income. A $200k earner who spends $195k has nothing to defer; a $110k earner who lives on $60k can defer meaningfully. The calculator's break-even line shows the retention level where the deferral covers the corp's running costs at your marginal rate.

Why is Québec different?

Québec requires 5,500+ paid employee hours a year to claim its small-business rate — a solo corporation can't reach it, so Québec's general 11.5% provincial rate applies (20.5% combined). The deferral spread is thinner, so the break-even retention is higher than in other provinces.

What about paying myself dividends instead of salary?

Salary vs dividends is a second-order optimization once you've incorporated — the totals land close after integration. Get the incorporate-or-not decision right first; model the payout mix with your accountant in the first year.

Is incorporating expensive?

The government fee is $200 (federal, online) or $300 (Ontario). Doing it with a lawyer or online service costs more but buys share-structure advice. The recurring cost is the real one: corporate tax returns and bookkeeping, typically $1,500-3,500/yr.

Should you incorporate?

What this number is — and isn't

FAQ