Leak 1: while it sits
Profit you don't need can stay in your corporation and be invested, but the investment income it earns is taxed at about 47% to 54% depending on the province. Part of that tax is refunded when the corporation pays you taxable dividends, so how the money is invested and when you take it out both change the cost.
There's a second, less obvious leak. Once a corporation earns more than $50,000 of investment income in a year, its small business limit shrinks by $5 for every dollar over, and disappears at $150,000. Practice income above the reduced limit is then taxed at the higher general rate.
Leak 2: getting it out
Every route from your corporation to you costs personal tax, and the route changes how much. Salary is taxed as income but builds RRSP room. Dividends build none, and they're taxed differently because the corporation has already paid tax. Shareholder loan repayments and capital dividends can move money out tax-free. Some routes have traps, like shareholder loan rules and the income-splitting rules, so have a CPA confirm the detail.
The first question to answer: what do you actually need personally over the next five years? That decides how much is long-term money, and the best route for it.
Leak 3: your estate
The same money shapes your estate bill. Without planning, assets in a private corporation can be taxed twice at death: once on the shares, and again when the money is paid out to your estate. Corporate-owned life insurance, paid out through the capital dividend account, and a will that deals properly with your shares are the usual ways to reduce it.
Common questions
How is investment income taxed inside a professional corporation?
Interest and the taxable half of capital gains are taxed at about 47% to 54% in 2026, depending on the province. About 30.67% of that investment income is refunded to the corporation when it pays taxable dividends to you.
What is the $50,000 passive income rule?
If a corporation (and any associated corporations) earns more than $50,000 of investment income in a year, its federal small business limit shrinks by $5 for every $1 over, and is eliminated at $150,000. Ontario and New Brunswick don't apply this reduction to their provincial rates.
Can money come out of my corporation tax-free?
Sometimes. Repaying a documented shareholder loan and paying capital dividends from the capital dividend account are both tax-free to you. Your accountant tracks both balances.
Why does my corporation affect my estate?
Shares of a private corporation are treated as sold at death, and the money inside can be taxed again when it's paid out. Without planning, the combined tax can be high. Insurance and post-mortem planning with your accountant can reduce it.
Is this tax advice?
No. It's general information and an estimate. Have a CPA confirm the detail, ideally working together with your advisor.