Should I invest inside my corporation or take the money out?

Short answer: It depends on when you need the money and how much investment income your corporation will earn. If you will not need the cash for years and your passive income stays under $50,000 a year, leaving it in the corporation is a common and defensible choice, because you defer personal tax. If you need the cash soon, or your corporation is heading past $50,000 of passive income, taking money out or restructuring deserves a closer look. Your accountant should run your actual numbers.

What are you actually choosing between?

You have profit sitting in your corporation. It has already been taxed once at the corporate level. There are two common paths from here.

Option A: leave it in the corporation and invest it there. You defer personal tax, so more dollars are working for you today. The investment income is taxed inside the corporation each year at a high rate (about 50.17% on interest in Ontario). A portion of that tax, about 30.67% of the income, is refundable when the corporation pays non-eligible dividends. The refund works out to 38.33 cents for each dollar of non-eligible dividend paid, up to the balance in the corporation's refundable tax account.

Option B: take it out and invest it personally. You pay personal tax now, up to roughly 53.53% on salary at the top Ontario bracket (lower on dividends, and lower brackets fill first). You invest what is left. The investment income is then taxed at your personal rates, and your TFSA and RRSP room can shelter some of it.

Where does the $50,000 line sit?

Your corporation pays a combined federal and Ontario rate of 11.2% on its first $500,000 of active business income. That is the small business deduction. Ontario lowered its share on July 1, 2026, and the combined rate was 12.2% before that.

If your corporation earns more than $50,000 a year of passive investment income, that $500,000 limit shrinks by $5 for every $1 over. At $150,000 of passive income the deduction is gone. The limit is shared across associated corporations.

Here is what that looks like at ordinary sizes.

Illustration: $250,000 invested inside the corporation at an assumed 5% return earns $12,500 a year. That is well under $50,000, so the small business deduction is untouched. The corporation pays about $6,271 of tax on the income (50.17%), and about $3,834 of that is refundable when it pays non-eligible dividends.

At this size the threshold is not the problem. The annual tax on the income is the bigger cost. The threshold becomes the problem around $1,000,000 of invested assets at the same assumed 5% return, because that produces $50,000 of income.

What does it cost to take the money out later?

Money in the corporation is not yours until you pay it out as salary or dividends. Both are taxed personally. Deferring tax is not the same as avoiding it.

So the useful question is when. If you plan to take this money out in the next five years, deferral buys you little. If it will sit for twenty years and come out gradually in lower-income years, deferral may be worth a lot. Your accountant can model both timelines against your actual income.

Is there a way to use corporate assets without selling them?

Sometimes, and it gets skipped because most people only hear two choices: leave it in or take it out. In general terms, and not as advice for your situation: a shareholder can ask the corporation's board to allow a corporate asset to be pledged as collateral, in exchange for value to the corporation. If the board approves, that collateral can support a loan the shareholder takes personally from a lender.

Done with clear documentation, a fair arrangement and the rules followed, there is nothing wrong with that setup. The concept is simple. The execution has several steps, and each one matters.

It is an option, not a default. There is interest to pay, the lender holds the asset as security, and the loan has to be one your cash flow carries in a bad year. The corporate rules and the tax rules on shareholder benefits and shareholder loans still apply. Your accountant and lawyer should confirm whether it works for you, and how to document it, before anything is signed.

Where does insurance fit?

Some owners place part of this money into a participating whole life contract owned by the corporation. I set these up, so you should weigh my view with that in mind, and it is not right for every owner. Growth inside an exempt policy is generally not taxed each year and does not count toward the $50,000 passive income test. That is a feature, not a reason to buy one. The full list of costs and who it does not suit is on the page about corporate-owned life insurance.

Related questions people ask

How much passive income can my corporation earn before it costs me?

$50,000 a year of adjusted aggregate investment income, shared across associated corporations. Above that, your $500,000 small business limit falls by $5 for each $1 over. At $150,000 it reaches zero.

Can I put money into my TFSA straight from the corporation?

No. The corporation cannot contribute to your TFSA. You pay yourself first, as salary or a dividend, and then contribute personally within your available room.

Is salary or a dividend better if I plan to invest personally?

It depends on your situation. Salary creates RRSP room and Canada Pension Plan contributions. Dividends do not, and are taxed differently. Your accountant can compare the two against your income and goals.

Will these rates and thresholds change?

They move. The Ontario small business rate changed on July 1, 2026. Confirm current figures with your accountant before acting on any of this.