This calculator provides estimates to help you think through your owner pay. Tax rates used are approximate and vary by country, province/state, income level and personal circumstances. Always consult a qualified accountant (CPA/CA) before making decisions about owner compensation, especially regarding RRSP room, corporate distributions, or dividend vs salary strategy.
Enter your revenue, expenses and financial goals — the calculator works out the sustainable owner pay you can draw.
As a sole proprietor or unincorporated freelancer, you do not pay yourself a formal salary. Instead, you take an "owner's draw" — a transfer from your business bank account to your personal account. This draw is not a deductible business expense. Your entire net profit (revenue minus business expenses) is taxable income regardless of how much you actually transfer to yourself. This is why setting aside tax on every payment received is critical — not just on what you draw.
A common starting framework: 50-60% of net profit after all business expenses. The rest covers taxes (25-35% depending on country and income), emergency buffer (3-6 months of operating costs), reinvestment, and retirement savings. Your actual number depends on your tax rate, revenue consistency and personal needs. Use this calculator to work out your specific allocation rather than applying a blanket percentage.
Incorporation can be tax-advantageous when your self-employment income significantly exceeds your personal spending — because you can retain profits in the corporation at a lower corporate tax rate and pay yourself only what you need. However, for most sole proprietors earning under $80,000-$100,000 who spend most of what they earn, the complexity and cost of incorporation (accounting, legal, annual filings) typically outweighs the tax benefit. Get professional advice before incorporating.
The key is separating your business account from your personal account and creating a "smoothing" mechanism. In good months, leave excess in the business account. In slow months, draw from that buffer rather than cutting your pay. The goal is a consistent monthly personal transfer — your "salary." The buffer should be 3-6 months of your target monthly pay, built up before you start paying yourself that amount consistently.
For employees, 3 months is commonly recommended. For freelancers, 6 months is the minimum for variable-income businesses, and some advisers suggest 12 months for highly seasonal industries. This emergency fund should cover both your personal living expenses AND your business operating costs. Keep it in a high-interest savings account separate from both your business operating account and your tax savings account.
As a sole proprietor (unincorporated), no — your owner draw is not a deductible expense. Your business profit is taxable regardless of whether you draw it. If you are incorporated, a salary paid to yourself is deductible by the corporation, creating RRSP contribution room and reducing corporate profits. Dividends paid from a corporation are not deductible. The salary vs dividend decision is complex and tax-jurisdiction specific — consult a CPA.