Are You Paying Yourself Properly? A Guide for Small Business Owners and Incorporated Professionals

How to Pay Yourself as a Small Business Owner: A Guide for Small Business Owners and Incorporated Professionals

Clear answers to a question that stresses out way too many business owners: How to pay yourself as a small business owner.

You’ve built a business. You’re working hard. But when it comes to paying yourself, things can feel a little… uncertain.
How much is okay? Are you doing it “right”? Should it be a salary, a dividend, or just a transfer from your business account?

The truth is that how you pay yourself as a small business owner depends on how your business is structured and your financial goals.

Here’s what to know.

1. Are You a Sole Proprietor or Incorporated? That Changes Everything

Before we get into the “how,” let’s start with the “what.”

If you’re a sole proprietor, your business and personal income are the same in the eyes of the CRA.
If you’re incorporated, your business is its legal entity, with different rules for how money flows from the company to you.

This is the foundation for everything that follows.

2. If You’re a Sole Proprietor…

As a sole proprietor, you don’t pay yourself a salary. Instead, you simply draw money from the business as needed. That income is then reported on your personal tax return.

Here’s what that looks like in practice:

There’s no official “payroll”
You’re taxed personally on all business profits (not just what you withdraw)
You still need to track income and expenses carefully.
You may need to pay quarterly tax installments depending on your earnings.

Good bookkeeping is essential here—it helps you stay on top of what’s yours vs. what belongs to the business.

3. If You’re Incorporated… You’ve Got Options

Incorporated business owners can choose how they pay themselves. The two main ways are:

● Salary

Regular, recurring payments
Counts as a business expense (lowers corporate taxes)
Requires payroll setup, deductions (CPP, income tax, etc.)
Builds RRSP contribution room

● Dividends

Paid from after-tax business profits
No CPP contributions
Simpler to issue, less admin
Not deductible as a business expense

● Or… Both

Many incorporated professionals use a blended approach—a modest salary plus periodic dividends. This can create tax efficiency while still supporting long-term goals.

4. So What’s the “Right” Way?

There’s no one-size-fits-all answer. The right choice depends on:

Your income level
Your retirement plans (CPP vs. private savings)
How stable your cash flow is
Whether you’re planning to reinvest in the business
Your personal tax bracket

What matters most is being intentional—and making sure your paycheque supports your real life, not just your spreadsheets.

5. Make It Official (and Sustainable)

However you choose to pay yourself, consistency is key.

Set a regular payment schedule.
Track it correctly in your accounting software.
Don’t forget to plan for taxes (especially with dividends or draws)
Talk to an expert before making significant shifts.

Getting this right isn’t just about compliance—it’s about clarity, stability, and peace of mind.

Your Paycheque Should Work for You

At Numble, we work with small business owners and incorporated professionals to set up payment structures that make sense for today and for the future.

If you’re not sure whether you’re paying yourself the right way, we can help you find a better approach—one that feels sustainable, strategic, and stress-free.

Let’s talk about what would work best for your business—and your life.