Salary or dividends? How should you pay yourself?

As a business owner, you have the flexibility to decide how you want to pay yourself. To make the best decision, it’s important to understand each option. This infographic looks at the key benefits of paying yourself a salary or paying yourself dividends so that you can make a decision that works best for you and your business.

Salary or dividends? Deciding how to pay yourself from your corporation

Salary benefits

  • Increases your personal RRSP room
  • Taxes are withheld allowing you to easily manage your expected personal tax bill
  • Contributions are made to CPP and EI allowing you to benefit from the programs in the future
  • Provides proof of a steady income which is typically needed when you apply for personal credit such as a mortgage
  • Helps your business qualify for government programs that require ongoing salaries

Dividends benefits

  • Reduced your business and personal expenses as no CPP or EI contributions are needed
  • Less administration — easy to set up and creates the ability for you to take cash as needed and declare a dividend for the amount at year-end
  • Avoids or reduces business costs related to employer health tax in certain provinces

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