Enter your business revenue, write-offs, and preferred pay structure to see your total tax burden, take-home pay, and potential savings from incorporating — including salary vs dividend strategies.
✓ $3,500 = CPP basic exemption — no CPP contributions triggered on this salary.
All after-tax corp income paid as dividends. Remainder stays in corporation.
A sole proprietorship is simpler, cheaper to run, and may actually be more tax-efficient at lower income levels.
The CPP basic exemption is $3,500. Paying yourself exactly $3,500 in salary creates a T4 record (useful for mortgage applications, credit, and maintaining your CPP contribution history) without triggering any CPP premiums — the $3,500 falls entirely within the exemption.
If your salary exceeds $3,500, CPP applies to the excess at 5.95% (employee) + 5.95% (employer), up to a maximum pensionable earnings of $71,300 in 2025.
Corporations create a tax deferral opportunity — the 11% corporate rate vs. your personal marginal rate of 25–48% means money left in the corporation is taxed much less until you take it out.
Canada's tax system is built on integration — the idea that a dollar earned through a corporation and eventually paid out as a dividend should bear roughly the same total tax burden as a dollar earned directly and taxed personally. In practice integration is imperfect, but it holds reasonably well in Alberta: eligible dividends carry an effective personal tax rate of approximately 24.8%, which, stacked on top of the 11% already paid corporately, lands close to (though not exactly at) the personal rate you'd pay as a sole proprietor.
Concretely, on $100,000 of net active business income: $89,000 remains after 11% corporate tax if left inside the corporation, versus $52,000 remaining after paying personal tax at the top 48% sole-proprietor rate — a $37,000 gap. That gap isn't free money; it's working capital that compounds inside the business until it's eventually paid out and taxed again personally. The benefit is time value — the government's future tax share works for your business today, not a permanent reduction in lifetime tax.
A corporation provides limited liability in principle — shareholders generally risk only the capital they've invested. But for most small Alberta businesses, banks and commercial lenders routinely require a personal guarantee before extending a business loan or line of credit. The moment you sign a personal guarantee, the corporate veil offers little practical protection against that specific debt. Incorporation's liability shield remains most valuable against professional or client-facing risk — lawsuits, contract disputes, slip-and-fall claims — rather than protection from debts you've personally guaranteed to a lender.
Salary (above $3,500): Deductible to the corporation, reduces corporate tax. Creates RRSP room (18% of earned income). Triggers CPP contributions — employee and employer portions combined cost up to $8,068/year. Use our dedicated salary vs dividend calculator to optimize the mix.
Dividends: Paid from after-tax corporate income. No CPP, no RRSP room. Non-eligible dividends (typical for CCPC small-business income) carry a 15% gross-up and 9.03% federal dividend tax credit. Each province also provides its own non-eligible DTC — ranging from 0.67% (YT) to 6.0% (NT) of the taxable dividend — which this calculator applies automatically based on your selected province.
Full combined marginal rate tables for every province are on our Alberta & Canadian tax rates page. Business owners should also check the vehicle write-off calculator for CRA lease and finance deduction limits.
These numbers are a starting point. We'll model your exact situation — including RRSP room, CPP optimization, family trust opportunities, and the true cost of incorporating — so you keep more of what you earn.
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