Leave it in the company
This defers personal tax, but investment income is taxed at roughly 50% in Ontario, with part refunded when taxable dividends are paid. See investing inside a corporation.
For Incorporated Owners
Financial Planning for Incorporated Business Owners
One plan across your corporation and your personal finances, organized around the decisions owners face.
The Big Picture
Why plan the corporation and your personal finances together?
Because the two are tied together. What the company earns, keeps and pays out decides what your family lives on and what funds your retirement.
An owner decides what an employer decides for most staff: pay, pension and benefits. Each choice affects the others. Salary creates RRSP room but adds personal tax. Leaving surplus in the company defers personal tax but can build passive income.
Your accountant leads the tax side, and we coordinate the plan and the insurance side.
The five decisions
- How do I pay myself?Salary, dividends or a mix
- What do I do with surplus?Keep it, pay it out or use a structure
- How do I retire?With no employer pension
- What protects the business and family?Insurance and agreements
- How do I leave?A sale or a transfer
Decision 1: Paying Yourself
Should I pay myself salary or dividends?
Most owners use one, the other or a mix, and the answer can change yearly. Your accountant sets it with you, and our guide to salary vs dividends walks through the trade-offs.
| Salary | Dividends | |
|---|---|---|
| To the corporation | Generally deductible | Not deductible; paid from after-tax profit |
| RRSP room | Creates room, as earned income | Creates none |
| Canada Pension Plan | Employer and employee contributions, and CPP credits | Generally no contributions or credits |
| Individual Pension Plan | Pension room is based on salary | Doesn't count |
Decision 2: Using Surplus
What should I do with surplus in the company?
You can leave it in the corporation, pay it out, or use a planning structure alongside the company. Most owners end up with a combination.
First, the business needs a cash reserve, its debt under control and the right insurance on the people it depends on. Our article on retained earnings goes further.
Pay it out
This moves money into your hands, where RRSP and TFSA room may be available, but personal tax comes first.
Use a structure
A pension or corporate-owned life insurance may fit a real need. A holding company changes where surplus sits, but associated companies are counted together for the $50,000 passive income test.
We don't manage investments
We offer segregated fund contracts and annuities. We don't recommend or manage stocks, ETFs, mutual funds, bonds, GICs or portfolios. Your portfolio manager or investment advisor stays in place.
Decision 3: Retiring
How do I retire without an employer pension?
You build your own. The usual pieces are RRSP and TFSA savings, corporate surplus, CPP earned through salary and, for some owners, a pension the corporation funds.
RRSP and TFSA
An owner paid only in dividends generally builds no new RRSP room. TFSA room doesn't depend on earned income.
Individual Pension Plan
An IPP is a defined benefit pension your corporation sponsors. For many owners over about 40 on a steady salary, it can allow larger contributions than an RRSP, generally deductible to the corporation. It brings actuarial costs and funding obligations, and locks the money in.
Retirement Compensation Arrangement
An RCA can fund retirement above registered plan limits for higher-income owners, with a 50% refundable tax and complex rules.
Turning it into income
When the salary stops, the question is what to draw from where, and in what order. We model this with your accountant. An annuity can cover core expenses for some owners, though once purchased the money generally can't be withdrawn.
Decision 4: Protecting the Business and Family
How do I protect the business and my family?
Start with what would happen if an owner died, became disabled or fell seriously ill. Then match coverage to each risk, and make sure the agreements behind it exist.
Key people
Key person insurance can help the business absorb the loss of someone it depends on.
Partners
Buy-sell insurance can fund the shareholder agreement your lawyer drafts.
Your income
Disability and critical illness coverage can help protect you if you can't work or become seriously ill.
Your estate
Where permanent coverage is truly needed, such as for tax on your shares at death, corporate-owned life insurance may fit. It is insurance first, and a long-term commitment.
Decision 5: Leaving
How should I plan my exit?
Start years before you expect to leave. The tax result depends on how the company is set up well before that day.
Selling your shares
An individual selling qualifying small business corporation shares may be able to claim the lifetime capital gains exemption, $1.275 million of gains for 2026 and indexed to inflation. The shares must pass tests, so investments built up in an operating company can get in the way.
Passing it to family or employees
A sale to a family member's corporation has its own rules under section 84.1 of the Income Tax Act, which changed in 2024. An employee ownership trust is another route. See business succession planning.
Who It Fits
Who is this for?
- Surplus beyond what the business needsRetained earnings growing
- No pension plan in placeRetirement depends on the company
- Partners without a funded agreementNo insurance behind it
- Incorporated professionalsSee professional corporations
What to Weigh First
When may it not fit?
You aren't incorporated
Start with financial planning for individuals and families.
The business needs every dollar
Start with a cash reserve and core insurance.
You want a portfolio managed
That stays with a portfolio manager or investment advisor.
How We Work With Your Accountant
Who does what?
Nothing is recommended until your accountant has reviewed the numbers.
We coordinate
We model the insurance and pension options, then handle insurers, actuaries and paperwork.
Your accountant confirms
They confirm the tax treatment, and prepare returns and tax opinions.
Your lawyer documents
They draft shareholder agreements and wills, and lead any reorganization with your accountant.
Common Questions
Questions owners ask about financial planning
It depends on your income needs, your retirement plan and your corporation's tax position. Salary creates RRSP room and CPP contributions, and dividends don't. Many owners use a mix, which your accountant reviews each year.
Leaving it there defers personal tax, but investment income is taxed at roughly 50% in Ontario, with part refunded when taxable dividends are paid, and passive income above $50,000 a year can reduce the federal small business limit.
Corporate surplus, an Individual Pension Plan or a Retirement Compensation Arrangement can each play a part, depending on your age, salary and business. Each has costs your accountant should review.
Years before you expect to leave. The lifetime capital gains exemption depends on tests that look back 24 months, and a transfer to family or employees takes time to set up.
No. Your accountant leads the tax side and your lawyer handles agreements and wills. We coordinate the plan and the insurance side.
This information is general in nature and is not tax, legal, accounting, insurance or investment advice. It is based on current Canadian tax legislation, which can change. Any strategy should be designed and reviewed with your accountant and legal advisors based on your circumstances. Rates and limits are approximate and reflect 2026 federal and Ontario rules. Values above the policy guarantees, including dividends, can change.
Owner planning in Burlington, Oakville, Milton, Mississauga and Hamilton
Book a Consultation
Not sure which decision to tackle first?
A short call will show where to start, with your accountant involved if you like.
Prefer to talk? Call 289.339.8100
Thanks, your message has been received. We will review it and follow up with clear next steps. No pressure, no confusing insurance jargon.