When you incorporate your business in Canada, you can no longer simply take money from the business for personal use. You must pay yourself through proper channels — either a salary, dividends, or a combination of both.
Method 1 — Pay Yourself a Salary
Set Up Payroll with CRA
Register your corporation for a payroll account with CRA (RT account). You can do this online through My Business Account.
Determine Your Salary Amount
Decide how much to pay yourself. Most owners pay $50,000–$80,000 to maximize RRSP room while minimizing CPP costs.
Deduct CPP and Income Tax
Withhold employee CPP and income tax from each pay. Also remit the employer CPP portion. Use CRA's Payroll Deductions Online Calculator.
Remit to CRA Monthly
Send payroll deductions to CRA by the 15th of the following month. Late remittances result in penalties.
Issue T4 Slip in February
File T4 slips with CRA and provide a copy to yourself by the last day of February each year.
Method 2 — Pay Yourself Dividends
Ensure Retained Earnings Exist
Your corporation must have after-tax profits (retained earnings) before paying dividends. You cannot pay dividends on money that hasn't been earned.
Pass a Dividend Resolution
Directors must formally declare a dividend by passing a written resolution. Note the date, amount per share, and payment date.
Transfer Funds to Personal Account
Transfer the dividend amount from the corporate bank account to your personal account. Keep a record of the transaction.
Issue T5 Slip in February
File T5 (Statement of Investment Income) slips with CRA and give yourself a copy by the last day of February.
⚠️ Never do this: Do not simply transfer money from your corporate account to your personal account without properly recording it as salary or dividends. This creates serious tax problems and CRA issues.
Method 3 — Combination (Most Common)
Most Canadian business owners use a combination:
- Pay a salary of $50,000–$80,000 for RRSP room and CPP benefits
- Take the rest as dividends to minimize CPP costs
- Review annually with your accountant to optimize
✅ Pro tip: Keep personal and corporate finances completely separate. Have dedicated corporate and personal bank accounts and never mix them.
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