Incorporation Savings Calculator
Compare your tax as a sole proprietor vs. an incorporated business. See the annual tax deferral, the salary vs. dividend split impact and your 5-year cumulative savings, side by side, in 30 seconds. Ontario rates included. Written by a licensed Ontario CPA.
Sole Proprietor vs. Corporation Tax Calculator
See how much you could save by incorporating
Sole Proprietor
Corporation (CCPC)
This calculator provides estimates using Ontario combined federal/provincial rates for general guidance. Assumes CCPC with active business income under $500,000 (SBD eligible). Does not include CPP contributions, personal credits beyond the basic personal amount, dividend gross-up/credit or RRSP deductions. Actual savings vary. Book Free CPA Consultation →
Sole Proprietor vs. Corporation Tax Rates. Ontario
| Net Business Income | Sole Proprietor Tax | Corp Tax (12.2% SBD) | Tax Deferral | Deferral Rate |
|---|---|---|---|---|
| $50,000 | $7,325 | $6,100 | $1,225 | 2.5% |
| $75,000 | $14,725 | $9,150 | $5,575 | 7.4% |
| $100,000 | $22,562 | $12,200 | $10,362 | 10.4% |
| $150,000 | $40,197 | $18,300 | $21,897 | 14.6% |
| $200,000 | $59,392 | $24,400 | $34,992 | 17.5% |
| $300,000 | $99,122 | $36,600 | $62,522 | 20.8% |
| $400,000 | $138,852 | $48,800 | $90,052 | 22.5% |
| $500,000 | $178,582 | $61,000 | $117,582 | 23.5% |
Tax Deferral Is Not Tax Elimination: The corporation pays 12.2% now. When you eventually withdraw the retained earnings as salary or dividends, you pay personal tax at that time. The savings come from deferring the personal tax, keeping money invested in your corporation growing your business for years before you pay personal tax on it. At $200,000 net income, you defer $34,992 per year, which is $174,960 over 5 years working inside your corporation instead of going to CRA.
When Does Incorporation Save You Money?
| Your Situation | Incorporate? | Why |
|---|---|---|
| Net business income consistently over $75,000 | Yes | Tax deferral at 12.2% vs 29–53% personal rate creates meaningful annual savings |
| You do not need to withdraw all business income personally | Yes | Leaving profits in the corporation at 12.2% is the entire deferral advantage. If you withdraw 100%, the savings disappear |
| You want liability protection | Yes | A corporation is a separate legal entity. Personal assets are protected from business lawsuits and debts (with exceptions for director liability) |
| Net business income under $50,000 and you withdraw everything | Probably not | Incorporation costs ($35–$335 plus annual compliance) and the additional accounting complexity outweigh the minimal tax deferral at low income levels |
| You have significant business risk (construction, consulting, import/export) | Yes | Liability protection alone justifies incorporation. A $500,000 lawsuit against a sole proprietor reaches your personal bank account, house and RRSP (in some provinces) |
| You plan to sell the business in the future | Yes | The Lifetime Capital Gains Exemption (LCGE) of $1,016,836 per individual is only available on qualifying shares of a CCPC. Sole proprietors cannot claim it |
| You want to income-split with family (within TOSI rules) | Yes | Non-voting shares to family members allow dividend income-splitting where Tax on Split Income rules permit (adult children 18+ in many cases) |
| You are a professional (physician, dentist, lawyer, pharmacist) | Yes | Professional corporations provide the same tax deferral plus holdco planning, management fee structuring and LCGE multiplication on practice sale |
Worked Dollar Examples. Sole Proprietor vs. Corporation
| Scenario | Sole Prop Tax | Corp Tax + Personal Tax | Annual Savings | 5-Year Cumulative |
|---|---|---|---|---|
| Consultant. $120,000 net income, $60,000 salary | $28,537 | $14,620 | $13,917 | $69,585 |
| Contractor. $180,000 net income, $80,000 salary | $47,880 | $24,676 | $23,204 | $116,020 |
| Physician. $300,000 net income, $100,000 salary | $99,122 | $47,000 | $52,122 | $260,610 |
These Are Simplified Estimates: Actual incorporation savings depend on CPP contributions (self-employed pay both employer and employee portions as sole prop; incorporated owners can structure salary to optimise CPP), RRSP room (salary creates RRSP room at 18%; dividends do not), eligible vs. non-eligible dividend tax credits, personal deductions and spousal income. A CPA models your specific numbers. The calculator above is a starting point, not a final answer. Book Free Consultation →
What Does Incorporation Cost Through Gondaliya CPA?
| Item | Federal Incorporation | Ontario Incorporation |
|---|---|---|
| Gondaliya CPA incorporation fee (all-inclusive) | $35 | $335 |
| Includes: government filing fee | $200 | $300 |
| Includes: NUANS name search | Yes | Yes |
| Includes: Articles of Incorporation | Yes | Yes |
| Includes: corporate minute book | Yes | Yes |
| Includes: CRA Business Number and account registration | Yes | Yes |
| Ongoing: annual T2 corporate tax filing | From $400/year | From $400/year |
| Ongoing: monthly bookkeeping (if needed) | From $100/month | From $100/month |
The ROI on Incorporation: At $120,000 net business income, incorporation saves approximately $13,917 per year. The one-time incorporation cost is $35 (federal). The annual T2 filing cost is $400. Your net first-year savings after all costs: $13,482. By year 5, cumulative savings exceed $68,000. Incorporation pays for itself in the first month of operation for any business above $75,000 net income.
Frequently Asked Questions. Incorporation Savings
Ready to Incorporate? From $35.
Gondaliya CPA prepares and files your Articles of Incorporation, minute book, CRA registration and share structure, all for $35 federal or $335 Ontario.