Updated Checked by the Tax-Services.ca editorial team How we check
Small business tax software depends on one question: are you incorporated? A sole proprietor or partner reports business income on a personal T1 return. A corporation files a separate T2 return every year, so personal tax software is the wrong tool for it. The CRA sets that rule, and it decides which program you need before you look at a single feature.
Which return does your business file?
Sole proprietors put their income on a T1 with Form T2125. Partnerships file a T5013 information return, and each partner then reports their share on their own T1. Every corporation carrying on business in Canada files a T2, and the CRA points incorporated businesses to guide T4012 for it.
So if you’re a one-person shop and you haven’t incorporated, your choices are the same as any freelancer’s. The self-employed software checklist covers them. This page is for owners who already have a corporation or are weighing one.
What does a corporation pay on its profit?
A Canadian-controlled private corporation gets the small business deduction on its first $500,000 of active business income. Federal tax is 9% on that slice and 15% above it. The provinces then add their own rates, and they differ a lot.
| Item | Rate |
|---|---|
| Federal, small business income up to $500,000 | 9% |
| Federal, general rate | 15% |
| Saskatchewan, small business rate | 1% |
| Saskatchewan, general rate | 12% |
| GST/HST small supplier threshold | $30,000 of taxable sales |
The Saskatchewan lines are what the CRA page shows. Our own data marks them medium confidence, so confirm them before you rely on them. For Ontario, the small business rate fell on 1 July 2026, which means a calendar 2026 year blends two rates, and we won’t quote a figure for it. Quebec’s rate for calendar 2026 is 3.2% and the new 2.2% applies to years beginning after 29 April 2026. That’s Revenu Québec’s rule, and we haven’t read the full text, so check it.
What does $100,000 of profit look like in Saskatchewan?
Take a small corporation with $100,000 of taxable active business income. The corporate tax calculator shows $9,000 of federal tax and $1,000 of provincial tax. That’s $10,000, or 10.0%, and $90,000 stays in the company.
The owner has to take money out to live on it. If the company pays all $90,000 as dividends, the calculator adds $12,863.76 of personal tax. The owner ends with $77,136.24, and the combined tax is 22.9% of the profit.
Now compare a sole proprietor on the same $100,000 in Saskatchewan. The self-employed tax calculator shows $20,894.58 of income tax and $9,292.90 of CPP. They keep $69,812.52.
The corporation looks about $7,300 ahead. Don’t stop there, because dividends build no CPP room, accounting costs are extra, and neither tool models the taxable capital test or payroll rules.
Part of that gap is a pension you aren’t buying.
Do you need to register for GST/HST?
Probably, once taxable sales pass $30,000. The CRA calls that the small supplier threshold, and its page explains how the test is counted. A corporation and a sole proprietor follow the same rule. The GST/HST calculator works out the tax on each sale, so you can set it up before your first big invoice.
What mistakes do small business owners make at filing time?
Paying yourself without a plan is the big one, and most owners only find out what it cost them when the accountant’s bill and the tax bill land in the same month. Salary, dividends and leaving money in the company all have different tax results, and the corporate tool only shows the dividend case. Another is forgetting that several companies under common control can share one small business limit. A third is paying staff and then missing the source deduction remittance, which the payroll remittance calculator can plan for.
Anything involving a shareholder loan, a holding company or a large investment portfolio inside the corporation needs an accountant. The small business limit can shrink when passive income passes $50,000, and it reaches nil at $150,000, according to our data from the CRA. That’s where advice pays.
Where do the numbers come from?
Corporate rates come from the CRA’s corporation tax rates and provincial pages. Personal tax and CPP figures come from the CRA and provincial governments for 2026. We checked them on 29 September 2026. This site has no link to the CRA, Revenu Québec or any software company. We made no claims about the price or features of any product, because we couldn’t confirm them.
Frequently asked questions
Can I use personal tax software for my corporation?
No. A corporation files a T2 return, which is separate from your T1. Check that a program supports T2 before you pay for it.
Which form does a sole proprietor use?
Business income and expenses go on Form T2125, filed with your personal T1 return.
What is the federal small business rate?
It's 9% on the first $500,000 of active business income for a Canadian-controlled private corporation. The general federal rate is 15%.
When do I have to register for GST/HST?
The CRA sets a $30,000 small supplier threshold on taxable sales. Its page explains exactly how the test is counted.
Is it cheaper to incorporate on $100,000 of profit?
In Saskatchewan our tools show 22.9% combined tax if you pay everything out as dividends, against 30.2% for a sole proprietor including CPP. Dividends build no CPP, so the gap isn't all gain.
- How to choose a tax preparer in Canada
How to decide if you need a tax preparer, what a preparer does, the questions to ask before you hire one and where to find free help in Canada
Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.