RRSP or Corporate Investing?

An incorporated owner faces a choice employees never see: pay yourself salary and contribute to an RRSP, or leave the profit in the corporation — taxed at low active rates — and invest the larger remaining amount inside the company.

Both routes are deferral strategies. The corporate route starts with more capital working (because less tax was paid upfront); the RRSP route ends with cleaner, more protected, more flexible savings. The comparison is closer than most owners assume, and the details decide it.

Leaving $100 of profit in the corporation means roughly $88 invested after small business tax, versus perhaps $46–$50 invested personally after full personal tax — the corporate head start is real. But corporate investment income is taxed at high refundable rates as it is earned, and once the corporate group's passive investment income exceeds $50,000 in a year, the small business deduction begins shrinking — disappearing entirely at $150,000 of passive income. Successful corporate investors can tax themselves out of the low rate that created the advantage.

The RRSP requires salary (creating CPP costs but also CPP benefits), grows entirely tax-sheltered with no passive-income side effects, enjoys strong creditor protection, and produces retirement income independent of the company's fate. Most owners are best served by a deliberate blend: enough salary to fund meaningful RRSP room, with additional surplus retained and invested corporately — often through a holding company.