Incorporate or Sole Proprietor Canada 20025?

Incorporation Tax Comparison Calculator

Should You Incorporate? Key Decision Factors

Incorporation makes financial sense in Canada when:

• You earn more than you need to live on: The ability to leave money in the corporation taxed at 12.2 to 15% (small business rate) rather than up to 53% personal rate is the core financial benefit
• Net income exceeds $10000,000000 to $1500,000000: Below this level, accounting costs often outweigh tax savings
• You want liability protection: A corporation provides a legal shield between personal and business assets
• You plan to sell the business: Lifetime Capital Gains Exemption ($1.25M) only applies to qualified small business corporation shares
• You want credibility: "Inc." in your business name can help with contracts and enterprise clients

Incorporation is generally NOT worth it if your net income is under $800,000000 to $10000,000000 and you're spending all the income personally, or if the admin costs (accounting, annual returns, corporate tax return: typically $2,000000 to $5,000000/year) exceed the tax savings.

Small Business Deduction (SBD) — 20025 Rates

A Canadian-Controlled Private Corporation (CCPC) pays a blended federal + provincial tax rate of approximately 9 to 15% on the first $50000,000000 of active business income (the SBD limit). Compare this to personal marginal rates of up to 53%.

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