Canadian Tax and
Financial Information
Salary for Business Owner?

Ads keep this website free for you. does not research or endorse any product or service appearing in ads on this site.  Before making a major financial decision you  should consult a qualified professional.

Looking for US tax information?

Need an accounting, tax or financial advisor? Look in our Directory.  Use above search box to easily find your topic!   Stay Connected with!

What's New
Personal Tax
Sales Taxes
Free in 30!
Financial Planning
Real Estate
Stocks Bonds etc.
British Columbia
Atlantic Provinces
Federal Budget
Provincial Budgets
Statistics etc.
Site Map
Advertise With Us
Contact Us/About Us
Links & Resources

Business -> Salary for business owner?

As the Owner of a Small Business, Should I Pay Myself a Salary? 

What Deductions Would Apply?

Business Not Incorporated

If your business is not incorporated, whether or not you pay yourself a "salary" is irrelevant for tax purposes because you and your business are considered a single entity by Canada Revenue Agency (CRA).

You will be taxed on your net earnings from the business, which you will include on your personal tax return as self employment income.  Thus, there are no "deductions" to be taken from payments you make to yourself.  You are not required to pay  Employment Insurance, but you will have to pay income tax and Canada Pension Plan (CPP) premiums on the self employment income reported on your tax return.  You can choose to pay Employment Insurance premiums in order to qualify for EI "special benefits".  Depending on the province in which you operate, Workers' Compensation premiums may be payable.

When you file your tax return for your first year of self employment, you will have to pay any income tax and CPP premiums payable on your self employment income.

If your net taxes owing (excluding CPP premiums) exceeded $3,000 in either of the past 2 years, and will exceed $3,000 in the current year, you should be paying instalment payments to CRA for the current year.  Thus, you should plan ahead so you will ensure you have funds available if instalment payments are necessary.  See the CRA information on paying by instalments.

Business is Incorporated

If your small business is incorporated, whether or not you pay yourself a salary is a tax planning decision.  Another option is to pay yourself (and other shareholders, depending on share structure) a dividend, which is not deductible for the corporation.  There are many factors to consider, and professional advice in this area is strongly recommended.  If you decide to pay yourself a salary, you will be required to deduct income tax and CPP premiums from your salary, but as owner of the business you will not be eligible to be covered by Employment Insurance.  Depending on the province in which you operate, Workers' Compensation premiums may be payable, even if you do not pay yourself a salary.

See also

    - EI for the self-employed

    - July 2017 draft legislation re tax changes for private corporations - in particular "income sprinkling"

Revised: May 23, 2018

Copyright © 2002 Boat Harbour Investments Ltd. All Rights Reserved.  See Reproduction of information from

Facebook  | Twitter  |  Google + |  Monthly Newsletter Sign-up  What’s New E-mail Notification RSS News Feed
The information on this site is not intended to be a substitute for professional advice.  Each person's situation differs, and a professional advisor can assist you in using the information on this web site to your best advantage. 
Please see our legal disclaimer regarding the use of information on our site, and our Privacy Policy regarding information that may be collected from visitors to our site.