Frequently Asked Questions
When should I incorporate my Ontario business?
Most businesses in Mississauga and the GTA should consider incorporation when net income exceeds $60,000-$80,000 annually. At this threshold, the small business tax rate (12.2% in Ontario) becomes significantly lower than personal tax rates (which can exceed 50%). Incorporation also provides liability protection, income splitting opportunities, and estate planning benefits. Consult with a CPA in Toronto or Mississauga to assess your specific situation.
What are the tax rates for incorporated businesses in Ontario?
For 2026, Ontario corporations pay a combined federal-provincial rate of 12.2% on the first $500,000 of active business income (Small Business Deduction rate). Income above $500,000 is taxed at 26.5%. This is substantially lower than personal income tax rates in Ontario, which range from 20% to 53.53% depending on income level. Our Mississauga CPA firm specializes in optimizing corporate tax structures for GTA businesses.
Can I save on CPP contributions by incorporating?
Yes. Sole proprietors in Canada must pay both employee and employer portions of CPP (11.9% on income between $3,500 and $71,300 in 2026, max $7,735). As a corporation owner in Ontario, you can pay yourself dividends instead of salary, avoiding CPP entirely. However, this reduces your CPP retirement benefits. Many Toronto and Mississauga business owners use a mix of salary and dividends. Our firm provides personalized incorporation and payroll planning for Ontario businesses.
What are the costs of incorporating in Ontario?
Ontario incorporation costs include: filing fees ($300-$360 for provincial, $200 federal), legal fees ($500-$1,500), annual corporate tax return preparation ($1,000-$3,000), and ongoing bookkeeping. Despite these costs, most Mississauga and GTA businesses save significantly more in taxes once incorporated. Insight Accounting CPA offers fixed-fee incorporation packages with ongoing support for businesses across Ontario.
How does income splitting work with a corporation?
Ontario corporations can split income by paying reasonable salaries or dividends to family members who are shareholders and actively involved in the business. Tax on Split Income (TOSI) rules limit certain income splitting strategies, but legitimate business arrangements remain effective. For example, paying your spouse a salary for bookkeeping services can reduce overall family tax. Our Mississauga CPA team navigates TOSI rules to maximize compliant tax savings for GTA families.