Decide whether incorporation makes sense for your BC business — based on your real after-tax dollars.
Where to start
Enter your annual business profit and how much you take out personally. We’ll show your after-tax dollars under each structure side-by-side — in under 30 seconds.
Step 1 — Enter your situation
All figures in 2026 dollars, BC + Federal combined rates. Results update live as you type. Defaults are set near the break-even point so you can see the lever clearly.
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Incorporation is favourableCalculating...
Find your break-even point. Click to set net business income to the level where incorporation is exactly tax-neutral with sole-prop, given your current lifestyle and comp method. Floored at your lifestyle need — net income below that means the lifestyle can't be funded.
Annual Tax Savings
$0
Net of corp costs
Personal vs. Corporate Tax Rate
—
Personal − Corporate spread
20-Yr Corporate Asset Value
$0
Gross — see chart for net after distribution tax
Sole Proprietor
Pay personal tax on all profit
Net business income$0
CPP (both halves)$0
Personal income tax$0
After-tax personal cash$0
Effective tax rate0%
Incorporated
100% Salary
Net business income$0
Owner salary (deductible)$0
Employer CPP + admin$0
Corporate tax (SBD)$0
Dividends paid out$0
Personal tax (sal + div)$0
After-tax personal cash$0
Retained in corporation$0
How retained earnings grow
Each year, instead of pulling all profit out and paying personal tax on it, you can leave the excess inside the corporation to compound. We apply BC's ~50.7% combined rate on passive investment income with a simplified RDTOH refund mechanism (≈20% net drag). The chart below tracks the corporate asset value over time, alongside the estimated tax bill when those funds are eventually distributed to you personally.
Corporate asset value & eventual tax liability
Annual retained earnings compounded inside the corporation as an investment. The gap between the two lines is the deferred personal tax bill payable when the funds are eventually distributed.
Time horizon:
Year 0
Gross value:$0Net to owner:$0Deferred tax:$0
Corporate asset value (gross) Net to owner (after-tax) Deferred personal tax
Distribution tax assumption: the green line assumes you withdraw the entire balance in a single year as a non-eligible dividend with no other personal income — a worst-case marginal rate scenario. In practice, distributing over multiple years (e.g., during retirement) will reduce the tax bill and bring the green line closer to the navy line.
Detailed tax breakdown
Component
Sole Prop
Corporation
Key assumptions & limitations
This calculator is a planning tool, not advice. The math is built on the simplified BC + Federal 2026 model below. Real situations require a deeper review.
Tax rates & structure
Personal: Combined BC + Federal 2026 progressive brackets, single individual, basic personal amount only.
Corporate: 11% Small Business Deduction (SBD) rate on active business income up to $500,000.
Dividends: Non-eligible dividend gross-up (15%) and combined federal + BC dividend tax credit (~11%).
CPP: 2026 YMPE $74,600 / YAMPE $85,000; sole prop pays both halves; corporation pays employer half.
Passive investment: 50.67% combined corp rate, with simplified RDTOH refund treated as ~30.67% recoverable on eventual distribution (≈ 20% net drag).
What this model does NOT include
SBD grind on Adjusted Aggregate Investment Income above $50K (can fully phase out the 11% rate by $150K AAII).
BC Employer Health Tax (kicks in above $500K corporate payroll).
Family income-splitting via prescribed-rate loans, dividend sprinkling rules (TOSI), or paying spouse/children.
Lifetime Capital Gains Exemption planning on eventual share sale.
RRSP, IPP, or individual pension plan contribution interactions.
Liability protection, succession planning, creditor protection — non-tax reasons that often drive the decision.
Sequence-of-returns risk on the compounded investment chart.
Every taxpayer's situation is unique. The right comp strategy and incorporation decision depend on your specific income mix, family structure, RRSP room, retirement timeline, debt structure, and long-term goals (sell the business? pass to children? live off the corp in retirement?). These often change the answer materially. Before you incorporate or change how you take money from your business, get a personalized review.
Should you incorporate? Let's look at your specific situation.
This calculator handles the core math, but real incorporation decisions also weigh liability, retirement planning, family income-splitting, sale of the business, and where you'll be in 10 years. Steven Alexander CPA Inc. works with BC business owners to make this call with full context.
Important disclaimer: This calculator is for illustrative planning purposes only. It uses simplified 2026 BC + Federal combined personal tax brackets, the 11% BC small-business deduction (SBD) corporate rate on the first $500,000 of active business income, and approximate dividend gross-up & tax credit treatment for non-eligible dividends. Retained corporate investment income is taxed at the BC combined rate of approximately 50.7% with the simplified RDTOH refund mechanism. The model does not account for the small business deduction grind on passive investment income, provincial differences outside BC, employer health tax, pension income splitting in retirement, family income-splitting via prescribed-rate loans, capital gains exemption planning, or your specific personal credits. Actual outcomes will vary materially with your full tax picture. Consult Steven Alexander CPA Inc. before deciding to incorporate or change compensation strategy.