How to Pay Yourself as a Small Business Owner in Canada: A Simple System That Works

Let's talk about the thing nobody tells you when you start a coaching business.

You can have clients. You can have revenue coming in. You can even have a decent amount sitting in your business bank account.

But if you're not paying yourself consistently, you don't actually have a business. You have an expensive hobby that's slowly draining your energy and your bank account.

I see this all the time with the coaches I work with. They're great at serving their clients, but when it comes to paying themselves? They freeze. They feel guilty. They tell themselves they'll "figure it out later" or "take money when there's enough."

Here's the truth: learning how to pay yourself as a small business owner in Canada isn't complicated. You don't need fancy accounting software or a business degree. You just need a simple system and the permission to actually take the money you've earned.

In this guide, I'm walking you through exactly how to pay yourself from your business in Canada, whether you're a sole proprietor or incorporated, and how to set up a sustainable pay-yourself system, guilt-free, and that actually works.

Let's do this.

Why Paying Yourself Matters (Even When It Feels Hard)

Before we get into the how, let's talk about the why.

A lot of new business owners, especially women, struggle with paying themselves. We tell ourselves:

• "I'll pay myself when I have more clients."

• "I should reinvest everything back into the business right now."

• "I don't want to take too much and hurt the business."

But here's what happens when you don't pay yourself:

• You burn out. Running a business without compensation isn't sustainable. Eventually, you'll resent the work you once loved.

• You undervalue your expertise. If you won't pay yourself, why would anyone else want to pay you?

• You can't track profitability. If all your money stays in one account and you randomly pull from it when you need groceries, you have no idea if your business is actually making money.

• You feel like a fraud. Deep down, you know you're working hard but not getting paid. That doesn't feel like a real business.

Paying yourself isn't selfish. It's strategic. It's how you build a sustainable, profitable business that supports your life, not the other way around.

So let's figure out how to actually do it.

How to Pay Yourself from Your Business in Canada

The way you pay yourself depends on your business structure. In Canada, there are two main options for coaches and service-based entrepreneurs:

1. Sole proprietorship (you and your business are legally the same)

2. Corporation (your business is a separate legal entity)

Most new coaches start as sole proprietors because it's simpler and less expensive. If you've incorporated, you have more flexibility (and more tax considerations).

Let's break down both.

Salary vs Owner's Draw in Canada: What's the Difference?

This is where a lot of confusion happens. Should you pay yourself a salary? Take an owner's draw? What's the difference?

Here's the simple version:

What Is an Owner's Draw?

An owner's draw is when you transfer money from your business account to your personal account. It's not technically a "salary", it's just you taking money out of your business profits.

How it works:

• You decide how much to pay yourself (weekly, biweekly, monthly).

• You transfer that amount from your business bank account to your personal account.

• You don't withhold taxes at the time of payment. Instead, you'll pay both income tax and CPP contributions (both the employer and employee portions) when you file your annual tax return.

Pros:

• Super simple

• No payroll setup required

• Flexible (you can adjust the amount as needed)

Cons:

• You need to set aside money for taxes and CPP yourself. As a self-employed person in 2025, you'll pay CPP at a rate of 11.9% of your net business income (up to the annual maximum of $8,068.20), plus income tax based on your total taxable income.

What Is a Salary?

A salary is when you pay yourself as an employee of your own business. This involves setting up payroll, withholding income tax and CPP contributions, and issuing yourself a T4 at year-end.

How it works:

• You set a regular salary amount (e.g., $3,000/month).

• You deduct income tax and CPP from each payment.

• You remit those deductions to the CRA.

• At year-end, you issue yourself a T4 slip.

Pros:

• Builds CPP contributions (which increase your retirement benefits) and creates RRSP contribution room at 18% of your salary, up to the annual maximum of $32,490 for 2025.

• Creates a clear, consistent income stream

• Tax is handled throughout the year (no big surprise bill in April)

Cons:

• More admin (payroll remittances, T4s, etc.)

• Less flexibility (harder to adjust month-to-month)

Which One Should You Choose?

If you're a sole proprietor: take owner's draws and pay CPP contributions when you file your annual tax return.

If you're incorporated: You can choose between salary, dividends, or a combination of both. This is an area where you should consult with an accountant, as the tax implications vary significantly based on your income level, province, and personal situation. While dividends may appear more tax-efficient at first glance due to the dividend tax credit, salary generates RRSP contribution room and CPP benefits, and the overall tax impact depends on many factors including your province of residence and total income level.

How to Pay Yourself as a Sole Proprietor in Canada

If you're a sole proprietor (which most new coaches are), here's how to pay yourself:

Taking an Owner's Draw as a Sole Proprietor

1. Open a separate business bank account (if you haven't already). This keeps your business and personal finances separate, which makes bookkeeping and taxes way easier.

2. Decide how much to pay yourself. More on this in the next section, but start with a realistic amount based on your revenue and expenses.

3. Set a pay schedule. Weekly, biweekly, or monthly, whatever works for your cash flow. The key is consistency.

4. Transfer the money from your business account to your personal account on your chosen schedule. Treat it like a real paycheque, not a "whenever I feel like it" withdrawal.

5. Track it. Record each payment in your bookkeeping system (even if it's just a Google Sheet). Label it "Owner's Draw" or "Owner's Compensation."

6. Set aside money for taxes and CPP. As a sole proprietor, a good rule of thumb is to set aside 25–30% of your net income for taxes and CPP contributions. This percentage covers both your income tax (which varies based on your total taxable income and province) and your CPP contributions. Keep this in a separate savings account so you're not scrambling in April.

Important note: The CPP contributions for self-employed individuals in 2025 are 11.9% of your net business income (after expenses), up to a maximum of $8,068.20. This is in addition to your income tax. You'll receive a tax deduction for the "employer half" of the CPP contribution and a 15% federal tax credit for the "employee half" when you file your tax return.

That's it. No payroll software. No T4s. Just consistent, guilt-free payments to yourself.

How to Pay Yourself from a Corporation in Canada

If you've incorporated your business, you have two main options for paying yourself: salary or dividends (or a mix of both).

Salary vs Dividends: What's the Difference?

Salary:

• You pay yourself as an employee. Tax and CPP are deducted at source. Salary creates RRSP contribution room (18% of earned income up to $32,490 for 2025) and reduces your corporation's taxable income since salary is a business expense.

Dividends:

• You pay yourself from after-tax corporate profits. No CPP contributions are required. Dividends are taxed at a different personal rate than salary due to the dividend tax credit, and they don't create RRSP contribution room.

Which Option Is More Tax-Efficient?

This depends entirely on your specific situation. The concept of tax integration suggests that the total tax paid (corporate plus personal) should be roughly the same whether you take salary or dividends, but in practice, this varies significantly by province, income level, and personal circumstances.

Recent analysis shows that in most Canadian provinces, when considering the combined corporate and personal tax burden, salary is often more tax-efficient than non-eligible dividends for active business income under the small business deduction threshold, particularly when factoring in RRSP contribution room and CPP benefits.

General considerations:

• Lower personal income needs: Dividends may provide more immediate cash flow since there are no CPP contributions

• Want CPP benefits and RRSP room: Pay yourself a salary

• Income over $75,000–$100,000: A mix of salary and dividends often works best

This is one of those areas where it's worth investing in a consultation with an accountant who understands service-based businesses. They can run the numbers based on your specific situation, province, and goals, and potentially save you thousands in taxes.

How Much Should I Pay Yourself from My Small Business in Canada?

This is the question I get asked most: "How much should I actually pay myself?"

Here's the honest answer: it depends on your specific situation. But I'll give you a framework that works for most coaches.

The Simple Formula I Use with Clients

Step 1: Calculate your monthly personal expenses.
How much do you need to cover rent/mortgage, groceries, insurance, debt payments, and other personal costs? This is your baseline.

Step 2: Look at your average monthly business revenue.
What's coming in consistently? (Not your best month or your worst month—your average.)

Step 3: Subtract your business expenses.
This includes things like software subscriptions, marketing, professional development, bookkeeping, etc.

Step 4: Set aside money for taxes and CPP.
A good rule of thumb is to set aside 25–30% of your net income for taxes and CPP contributions, though this percentage may need to be adjusted based on your specific income level and province.

Step 5: What's left is available for you to pay yourself.

Example:

• Monthly revenue: $5,000

• Business expenses: $1,000

• Net income: $4,000

• Taxes and CPP (30%): $1,200

• Available to pay yourself: $2,800

If your personal expenses are $3,000/month and you can only pay yourself $2,800 right now, you have a few options:

• Increase your revenue (raise rates, add clients, launch a new offer)

• Decrease business expenses

• Supplement with savings or part-time income while you grow

The key is to pay yourself something, even if it's not your full target amount yet. Paying yourself $500/month consistently is better than paying yourself $0 and randomly pulling $2,000 when you panic about bills.

What to Do When Income Is Inconsistent

Welcome to coaching, where one month you make $8,000 and the next month you make $1,200.

Here's how to handle inconsistent income:

Option 1: Pay yourself a fixed amount based on your lowest earning month.
This keeps things predictable, and in high-income months, the extra money stays in your business as a buffer.

Option 2: Pay yourself a percentage of revenue.
For example, always pay yourself 40% of whatever comes in. This fluctuates with your income but ensures you're always compensated.

Option 3: Use a profit-first method.
Set up multiple bank accounts (Operating, Owner's Pay, Taxes, Profit) and automatically split every payment that comes in. This forces you to pay yourself first instead of hoping there's money left at the end of the month.

My personal favourite? A combination of Option 1 and Option 3. Pay yourself a baseline amount every month, and in high-income months, give yourself a bonus.

The Pay-Yourself-First System That Actually Works

Okay, let's make this practical. Here's the simple system I teach inside my Coaching to Cash Flow Programme:

Step 1: Open a Separate Business Bank Account

If you haven't done this yet, stop everything and do it today. Mixing business and personal finances is a nightmare for bookkeeping, taxes, and your sanity.

Most banks offer free or low-cost business accounts for sole proprietors. I recommend:

• Tangerine (no monthly fees)

• EQ Bank (no monthly fees)

• Your local credit union (often has great small business options)

Step 2: Decide on Your Pay Schedule

Pick a schedule and stick to it:

• Weekly: Great if you need frequent cash flow

• Biweekly: Mimics a traditional paycheque

• Monthly: Simplest for bookkeeping

Try to pay yourself biweekly so it feels like a "real job" and keeps you disciplined.

Step 3: Automate Your Payments

Set up a recurring transfer from your business account to your personal account. Most banks let you schedule this in about 2 minutes.

Treating your payment like a bill (non-negotiable, automatic) removes the guilt and decision fatigue.

Step 4: Track Everything (Simply)

You don't need expensive software. A simple Google Sheet with three columns works:

• Date

• Amount

• Type (Owner's Draw, Business Expense, etc.)

Or use free tools like Wave Accounting to track income, expenses, and owner draws automatically.

The goal isn't perfection...it's clarity.

What Happens If You Don't Pay Yourself?

Let me be blunt: if you don't pay yourself, you'll burn out, resent your business, and eventually quit.

I've seen it happen over and over. Talented, passionate coaches who work themselves into the ground and then decide "entrepreneurship isn't for me."

But the problem wasn't entrepreneurship. The problem was they never built a system to actually get paid for their work.

When you don't pay yourself:

• You can't track profitability (Is this business actually working?)

• You feel guilty spending money on yourself (even though you earned it)

• You start to resent your clients (because you're working for free)

• You lose motivation (Why am I doing this if I'm not getting paid?)

Paying yourself consistently is how you build a sustainable business. Full stop.

How Midlife and Energy Levels Affect How You Pay Yourself

Here's something most business coaches won't tell you: your energy matters.

If you're a woman in your 40s or 50s navigating perimenopause or menopause, your capacity isn't the same as it was in your 30s. And that's okay.

But it does mean you need to pay yourself in a way that honours your energy, not someone else's hustle culture.

Here's what that looks like:

• Don't underpay yourself and justify it with "I'll work more hours." If you're exhausted, working more isn't the answer. Raising your rates is.

• Build in buffer months. Some months you'll have less energy. Plan for it by saving extra in high-energy months.

• Pay yourself for rest. You're not a machine. If you need a week off, take it—and still pay yourself. This is why building profit margins matters.

Your business should support your life, not burn you out. And that starts with paying yourself like the valuable, experienced professional you are.

You Deserve to Get Paid

You didn't start a coaching business to work for free.

You started it to help people, build something meaningful, and yes—make money.

Paying yourself isn't greedy. It's not selfish. It's not "taking too much from the business."

It's how you build a business that's sustainable, profitable, and actually worth running.

So if you've been putting this off, consider this your permission slip: Pay yourself. Today.

Next Step:

Ready to simplify your business finances, set up a pay-yourself system that actually works, and finally feel confident about money?

👉 Inside my Coaching to Cash Flow Program, I walk you through exactly when and how to register for HST, how to set up your invoicing system, and how to stay compliant without the stress. Plus, you'll learn how to price confidently, pay yourself properly, and build simple systems that actually work for your business and your life. Join now and get the clarity and support you need to run a profitable, legitimate coaching business in Canada.

The information provided in this article is for educational and informational purposes only and should not be construed as financial, tax, or legal advice. While I am a CPA, I am not YOUR CPA, accountant, or lawyer. Tax laws, GST/HST regulations, business registration requirements, and legal structures vary by province and individual circumstances. For matters related to business structure, liability protection, contracts, or legal compliance, please consult with a qualified lawyer. For tax and financial matters, consult with a qualified accountant or tax professional. Always seek professional advice tailored to your specific situation before making any financial or legal decisions for your coaching business.

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