Founder's Formula: 8 Tax Advantages You Get When You Run a Business in Canada

This is a blog series written by Ross, the founder and CEO of YBL. It reflects the insights he believes are most important for business owners to understand. Each post highlights the ideas, strategies, and lessons that influence how Ross thinks about business and leadership.

The Founder's Formula is focused on practical, experience-driven guidance. It is shaped by the conversations Ross is having every day with clients, advisors, and the YBL team. This series offers a direct look into what matters most to him and why he believes it should matter to you.

In this edition, Ross shares eight tax advantages that are only available to business owners in Canada. These incentives are powerful tools for reducing tax, increasing flexibility, and building long-term financial strength. Understanding how to access them is a key part of becoming a more strategic entrepreneur.

Running a business in Canada comes with tax advantages that employees simply don’t get. From paying just 12.2% on the first $500K of active income, to deferring personal taxes, income splitting, and claiming powerful write-offs. These aren’t loopholes, they’re strategic tools built into the system to reward entrepreneurs. You can also access grants, claim pre-tax deductions for things like health and home office expenses, and potentially sell your business tax-free thanks to the Lifetime Capital Gains Exemption. These benefits take planning, so working with a knowledgeable accountant early on can help you structure things properly and maximize every opportunity.

Ready to unlock these advantages for your business?

Join YBL’s Virtual CFO program and get real executive financial strategy, proactive tax planning, and a partner who’s invested in your long-term success.

Visit our VCFO page for more info.

Running your own business opens the door to incredible tax planning opportunities that employees simply don’t get. These aren’t loopholes, they’re intentional, built-in incentives created by the government to encourage entrepreneurship and economic growth.

Whether you’re self-employed or incorporated, here are 8 powerful tax advantages available only to business owners in Canada and how you can start using them to keep more of your money working for you.

Incorporation isn’t just about sounding official, it’s about control. In Ontario, incorporated businesses pay just 12.2% tax on the first $500,000 of active income.

Compare that to personal tax: if you earn $150,000 in T4 income, you’ll pay roughly $50,000 in income tax plus CPP and possibly EI.

When you incorporate, your business income is taxed separately from your personal income. You only pay personal tax when you withdraw funds (via salary or dividends). That flexibility lets you:

It’s not tax evasion. It’s a tax strategy that works when you’re structured properly.

Because corporations pay their own tax, you don’t pay personally until you take money out.

Let’s say your business earns $150K. You can pay corporate tax at 12.2%, and leave the rest inside the company to expand, invest, or save. Personal tax is deferred, and deferral is one of the most underrated tools in the tax world.

Canada’s tax system is progressive. The higher your income in any one year, the higher the marginal rate you pay on each additional dollar.

But if you own a corporation, you control the timing of your withdrawals. That means you can:

Smart owners pay themselves intentionally, not just as money shows up.

The Tax on Split Income (TOSI) rules closed some doors, but not all. There are still ways to split income with family members:

It’s not about paying your teenager $50K to fetch coffee. But if your spouse handles admin or your child runs your social media there’s a legitimate path to tax savings.

Thinking about selling your business one day? This is the holy grail.

In 2025, each Canadian can shelter up to $1.25 million in capital gains tax-free when they sell shares of a Qualified Small Business Corporation (QSBC).

With smart planning, you can multiply that exemption across family members or beneficiaries of a family trust potentially shielding millions in gains from tax.

Just make sure the company meets the criteria:

Qualifying for these exemptions takes time, which is why early tax planning and working closely with an accountant is so important.

Business owners have access to tax credits and programs that employees never see. For example:

These are just a few, but many go unclaimed because business owners don’t know they exist or miss the reporting deadlines. That’s where working with a proactive accountant matters.

Employees pay expenses with after-tax dollars. Business owners? You get to use pre-tax corporate funds.

Here’s a real-world example:

That’s real money saved, often $1,800+, just by flowing it through your business the right way.

Other powerful pre-tax tools:

No, you can’t "write off your life." But you can deduct reasonable business expenses if they’re incurred to earn income.

Some of the most common and accepted deductions include:

Just be sure to document everything: receipts, mileage logs, invoices, client names, and purpose for meetings.

Incorporating a business in Canada isn’t just about optics or legal protection. It can unlock an entire toolkit of tax strategies that can accelerate your growth, build wealth, and give you more control over your money.

We work with business owners every day to help them structure things properly, stay compliant, and keep more of what they earn.

Got a business? Thinking about incorporating? Let’s chat. We’ll show you how to put these strategies to work for your bottom line.

Join YBL’s Virtual CFO program and get real executive financial strategy, proactive tax planning, and a partner who’s invested in your long-term success.

Visit our VCFO page for more info.