Incorporating vs. Staying a Sole Proprietor

Incorporating isn't automatically the right move at every income level. Find the point where it structurally starts saving you money, and how much, over five years.

Reading This Tool

How To Use This Calculator

Enter your current business income, how fast you expect it to grow, and how much you personally need to live on each year.

The tool searches for the exact income level where incorporating starts beating staying a sole proprietor, then projects both paths five years forward on the chart. If your current income already sits above that breakeven number, the case for incorporating is worth a real conversation, not just a back-of-envelope guess.

Your Inputs

Current Net Business Income $90,000

Annual Growth Forecast 12%

Annual Personal Living Expenses Needed $60,000

Province

Assumes any income above what you draw for living expenses is retained inside the corporation at the small business rate, rather than distributed. Ignores incorporation/dissolution costs and annual corporate filing fees.

The Tipping Point

Breakeven Net Business Income

Above this level, incorporating starts winning at your stated living-expense draw

Year 1 Tax, Sole Proprietor

Year 1 Tax, Incorporated

5-Year Cumulative Difference

Annual Tax Paid Over 5 Years, Sole Prop vs. Incorporated

Sole Proprietor Incorporated

This model ignores several real factors: incorporation costs, annual accounting/filing fees, the small business deduction grind-down from passive income, RRSP contribution room (which requires earned/salary income), and CPP contributions. It's directional, not a substitute for a proper incorporation analysis.

Thinking about making the switch?

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