Depending on which Province that you live in, for a self employed professional, you can pay as much as 50% on each taxable dollar earned in a year in excess of $130,000 or so.

Under current corporate tax rates, flowing this same income through a corporation will see the corporation pay approximately 11% corporate tax on the first $500,000 of taxable income that it earns each year.

As you draw taxable dividends from the corporation to cover personal needs, you pay personal tax on these dividends based on the level of taxable dividends that you draw each year. This tax rate is as low as 0% on the first $25,000 or so of taxable dividends drawn to about 38% tax at the highest level.

Some would argue that if you add the corporate tax of 12% and the personal tax on dividends at 38% you end up with a total of 50% so why bother incorporating in the first place? But what if the level of dividends needed to cover your living expenses for the year was taxed at less than 38%? For example, if you needed $5,000 per month to cover your living expenses you would need to draw $66,000 in dividends to net $60,000 or $5,000 per month after tax. If we add 12% corporate tax to the 9% ($6,000/$66,000) personal tax we come up with a combined 21%, not 50%.

Despite tax changes in 2018, this still may be an opportunity to split income with your spouse using dividends which can lower this personal rate even further as you take advantage of his/her personal tax brackets.