Sole Proprietor vs Corporation Calculator 2026

Compare keeping your business as a sole proprietorship with running it through a corporation: what you keep after corporate tax, personal tax and CPP, paid as salary, dividends or both, and how much tax you can defer by leaving money in the company.

✓ 2026 rates · verified Oct 21–29, 2026

The four ways, side by side

Everything taken out of the corporation. Tax + fees: corporate tax, personal tax and the corporation’s costs; CPP isn’t counted, since it builds your CPP pension. Left for you is the cash after tax and CPP, your other income included.

By profit

Taking everything out, incorporating costs more in tax and fees than a sole proprietor at every profit from $20,000 to $500,000 with these costs. What a corporation can offer is the deferral: see the last column.

Tax + fees difference: the cheapest corporate option’s tax and fees minus the sole proprietor’s income tax; positive means incorporating costs more. Integration gap: the corporation’s tax plus the personal tax on all-dividend pay, minus the sole proprietor’s income tax (CPP left out). Positive means the corporate route pays more tax on the same profit. Deferred, living on half: the tax and CPP you’d put off this year by taking out only half of what taking everything out would leave you.

The short answer

If you spend everything the business earns, incorporating rarely changes much: the tax system is built so a dollar of business profit pays about the same total tax whether you earn it yourself or through a corporation and then take it out (called integration). The corporation also costs money every year. Where a corporation helps is profit you don’t need yet: it pays the small business rate (11% in Alberta in 2026) and the rest can stay invested in the company until you take it out.

Deferral, not saving

Money left in the corporation has only paid corporate tax. When you take it out later as dividends, you pay personal tax on it then. So leaving money in mostly moves tax to a later year, ideally one where your other income is lower (a sabbatical, retirement). That’s why the calculator shows the deferral separately from what you keep.

Salary or dividends

• Salary is a business expense for the corporation, so it pays no corporate tax on it. You pay CPP on it, both halves (5.95% each up to $74,600, plus CPP2), which builds your CPP pension, and it creates RRSP room (18% of it, up to the limit).
• Dividends are paid from profit after corporate tax, and the dividend tax credit gives you credit for that tax. No CPP, so no CPP pension from it, and no RRSP room.
• No EI either way: you can’t get regular EI on your own salary if you control more than 40% of the voting shares (Employment Insurance Act, s. 5(2)(b)).

Salary up to the YMPE ($74,600) and the rest as dividends is a common middle: the full base CPP and RRSP room on the salary, the small business rate on the rest.

Worked example

A consultant in Alberta with $150,000 of profit, $3,000 of yearly corporation costs and no other income, taking everything out.

On tax and fees, the sole proprietor pays the least: $35,557.48 of income tax, against $37,267.34 for all salary ($34,267.34 of tax + $3,000 of costs), the cheapest corporate option, so incorporating costs $1,709.86 more. All dividends leaves the most cash ($109,122.28) because it skips $9,292.90 of CPP contributions, so no CPP pension is built on this income; on tax alone it pays $2,320.24 more ($16,170.00 + $21,707.72 against $35,557.48).

What this calculator assumes

Rates for tax year 2026, verified October 21 to October 29, 2026 · Page updated October 29, 2026