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The way to pay yourself from a Canadian corporation is salary, dividends or a mix, and on $100,000 of Ontario profit the calculators show you keep $69,857 from salary and $78,617 from dividends. The gap isn’t free money. Salary pays into CPP and builds RRSP room, and dividends do neither. Which one suits you depends on how much you need in your pocket now and how much you want working for your retirement.
Do you even pay yourself a salary as a sole proprietor?
No. If you run the business under your own name, the profit is already your income and you don’t draw a wage from yourself. You pay income tax on the profit, plus both halves of CPP, which is 11.9% up to $8,460.90 in 2026. The self-employed tax calculator covers that case (it leaves EI out, and its deductions lower income tax but not CPP).
The salary or dividend choice only comes up once you’ve incorporated.
What does $100,000 leave you as salary or as dividends?
We used an Ontario corporation with $100,000 to pay out and no other income for you. For salary, the company has to cover its own CPP and EI too, so the salary is $93,781 and the employer costs are about $6,219. For dividends, the company pays tax first.
| All salary | All dividends | |
|---|---|---|
| Corporation pays before paying you | $6,219 employer CPP and EI | $11,696 corporate tax |
| Paid to you | $93,781 | $88,300 |
| Your income tax | $18,155 | $9,683 |
| Your CPP and EI | $5,770 | none |
| You keep | $69,857 | $78,617 |
| Next year’s RRSP room | 18% of $93,781, about $16,881 | none from this pay |
The salary column comes from the income tax calculator and the dividend column from the dividend tax calculator, with the corporate tax calculator for the company’s share.
Why do dividends leave you more cash?
Partly because no CPP is taken. On the salary path, the two halves of CPP come to $9,292.90 between you and the company. That money buys pension, which is a real benefit, but it isn’t cash in hand this year. How much you value it turns on how far you are from retirement and what else you’re saving.
The rest is how the tax system treats each type of income. A dividend gets a credit for tax the company already paid. The calculators handle it, and we assumed other (non-eligible) dividends. If your corporation can pay eligible dividends, the answer changes.
Which one builds RRSP room?
Salary does. The CRA sets your RRSP limit at the lesser of 18% of last year’s earned income and the annual dollar limit, which is $33,810 for 2026 in our data. Its glossary lists employment and self-employment earnings as earned income and doesn’t list dividends. So all-dividend pay leaves you with no new room from that pay.
Many owners pay enough salary to use the RRSP room they want and take the rest as dividends. Test your own mix with the RRSP calculator. And if you know the take-home you want, the net to gross calculator works backward to the salary.
What if you leave the money in the company?
Then you pay no personal tax yet. The corporation still pays its own tax, 11.7% on the first $500,000 in Ontario in the calculator. Be careful with that rate. Ontario cut its small business rate on 1 July 2026, so the figure for a calendar 2026 year is a prorated blend that no official page publishes as one number. Treat $11,696 as an estimate.
Leaving profit in the company suits you if you don’t need the cash. It’s a poor plan if you’ll want the money next month, because you’ll pay the personal tax then anyway.
How does the money actually get to you?
Salary behaves like any paycheque. The company runs payroll, holds back your income tax, CPP and EI, and sends those amounts to the CRA on a schedule. Our payroll remittance calculator shows what a pay period adds up to. A dividend is different: it comes out of profit the company has already earned and taxed, and nobody holds anything back, so the tax shows up on your personal return later. Set a share aside each time or the bill in spring will sting.
Picture Marcus, who runs a small landscaping company in Ottawa. He pays himself a modest, steady salary so there’s a regular deposit for the mortgage, and takes a dividend in the slow months when cash allows. That kind of mix is common because it gives a predictable take-home and still keeps the tax bill in check. It’s an illustration, not a recommendation.
Can you change your mind next year?
Yes. Nothing locks you in. You can raise the salary when you want more RRSP room or a bigger pension, and lean on dividends in a lean year. What you can’t do is go back and rebuild room for a year when you paid no salary, so think about it before December rather than after.
Where this example falls short
It ignores your other income, a spouse, eligible dividends, passive income rules, the corporation’s other costs and associated companies that share the small business limit. Our Ontario dividend credit rates also haven’t been checked against a 2026 form. So use the table to see the shape of the choice. Don’t use it to set your pay.
The person who can settle it is an accountant who has your books in front of them, because the answer swings with your other income.
Where the numbers come from
Federal corporate rates come from the CRA‘s corporation tax rates page, 2026. CPP, EI, RRSP and tax figures are the 2026 values in our data, sourced to the CRA. The small business limit of $500,000 is the federal one.
Frequently asked questions
Can a sole proprietor pay themselves a salary?
No. The profit is already your income, and you pay income tax on it plus both halves of CPP.
Is a dividend or a salary better?
Neither wins for everyone. On $100,000 in Ontario, dividends leave $78,617 and salary leaves $69,857, but salary adds CPP and RRSP room.
Do dividends create RRSP room?
The CRA glossary lists employment and self-employment earnings as earned income and doesn't list dividends.
What is the RRSP dollar limit for 2026?
$33,810, or 18% of earned income if that is less.
Can I leave profit in the company?
Yes. The company pays its tax and you pay personal tax only when you take money out.
- Self-employed taxes in Canada: income, CPP and GST
How tax works when you are self-employed in Canada: reporting income and expenses, paying both halves of CPP, instalments and when to register for GST