Should You Invest in Your Small Business Corporation Account in Canada?

August 1, 2025

You’ve built your small business from the ground up, hustled through late nights, and maybe even survived a tax season or two. You are now sitting on some extra money in your Canadian Controlled Private Corporation (CCPC) account, and a question is ringing in your head: Should I invest this money within my corporation? It’s an opportunity that you shouldn’t miss, but it’s also a decision that demands a sharp strategy.

At Online Accountant, we’re here to break it down with a blend of insight and a whole lot of expertise. So, we are going to enter the world of corporate investing, evaluate advantages and disadvantages, and see whether it is your golden ticket to financial prosperity!

Why Consider Investing in Your Corporation?

You have a small business that is going well and making profits that are not urgent to you. Rather than letting that cash sleep in a low-interest account, you should utilize that to create your own wealth in a tax-effective manner. Investing in your corporation has its special benefits which cannot be assumed in the case of individual investment. Here is why it should be taken seriously to consider:

Tax Deferral Superpower: By keeping profits in your corporation, you defer personal income tax, as corporate tax rates (especially with the Small Business Deduction) are often lower than personal rates. For example, in 2025, the federal small business tax rate for eligible CCPCs is just 9% on the first $500,000 of active business income, compared to personal tax rates that can climb to 53.53% in Ontario for top earners (Canada Revenue Agency, 2025).
Flexibility for Future Needs: Excess funds in your corporation act like a financial cushion, smoothing out cash flow fluctuations or funding future expansions. As Ronika Khanna, CPA and founder of Montreal Financial, notes, "Retaining funds in the corporation allows for a cushion to smooth out fluctuations in earnings".
Diverse Investment Options: Your corporation can invest in anything besides well-known vehicles, such as stocks, bonds, real estate, and life insurance, just to mention a few. The catch? You must become a professional in terms of dealing with tax regulations.

To put money in your own company does not mean that everything is going to be easy from here on forwards, there are pitfalls to be avoided and regulations to be learned.

The Lay of the Land: Canadian Business Laws and Regulations

Canada’s tax world for small businesses is a maze, but it’s one you can conquer with the right map. There are special regulations of corporate investments laid down in Canada Revenue Agency (CRA), particularly regarding passive income. Once put in place prior to 2018, new rules squeezed the worst out of passive investment earnings inside CCPCs. This is the bottom line:

Passive Income Tax Hit: Passive income (think dividends, interest, or capital gains from investments not tied to your core business) is taxed at a hefty rate, around 50% across Canada, depending on the province (Small Business BC, 2022). Why? The CRA wants to discourage businesses from becoming investment vehicles rather than active enterprises.
Small Business Deduction (SBD) Reduction: If your CCPC earns more than $50,000 in passive income annually, the SBD limit ($500,000 of active business income taxed at a lower rate) starts to shrink. For every dollar of passive income over $50,000, the SBD limit drops by $5, potentially wiping it out entirely if passive income hits $150,000.
Capital Dividend Account (CDA) Perk: Here's a bright spot! When your corporation realizes capital gains, 50% of the gain is tax-free and added to the CDA, which can be paid out to shareholders tax-free. For example, a $100,000 capital gain means $50,000 can flow to you or your family without a tax hit.

These rules mean you need a game plan. Partnering with a knowledgeable and experienced accounting firm (like Online Accountant) means that you will not be left flying blind.

The Pros: Why Corporate Investing Rocks

Let’s discuss why investing in your corporation could be a game-changer for your financial future.

Tax-Deferred Growth: Money left in the corporation grows without immediate personal tax. This compounds your returns over time, giving you more firepower for reinvestment or personal withdrawals later.
Diversification Delight: As Small Business BC advises, "Diversification is the 'free lunch' of investing". Your corporation can invest in stocks, ETFs, mutual funds, GICs, or even real estate, spreading risk across sectors and geographies.
Lifetime Capital Gains Exemption (LCGE): Selling your business? The LCGE lets you shield up to $1.25 million in capital gains from tax in 2025, a massive win for incorporated businesses.
Corporate Life Insurance: Some business owners use corporate funds to buy permanent life insurance, where the investment portion grows tax-free, and the death benefit flows to the CDA for tax-free distribution.
Financial Cushion: Keeping your funds in the corporation creates a safety net for years that are slow workwise or for unexpected expenses, like tax instalments or equipment upgrades.

The Cons: Watch Out for These Pitfalls

Investing in your corporation isn’t going to be an easy shot. Here are the hurdles you need to clear:

High Passive Income Taxes: That 50% tax rate on passive income can sting. As Small Business BC notes, it is like the personal tax rate (highest) as observed in most provinces. In case you have investments that produce a ton of income, then you may end up losing your SBD, which will balloon your total amount of taxes.
Complexity Overload: The complexity of corporate investing is greater compared to personal investing. Whether to keep a check of CDA balances or to take a path through Tax on Split Income (TOSI) regulations, you would require a sharp accountant to sort things out.
Liquidity Concerns: Money tied up in corporate investments isn't as liquid as cash in a personal account. Need funds for a new venture? You might face delays or tax hits to access them.
Risk of Over-Diversification: While diversification is key, spreading investments too thin can dilute returns. As Peter Lynch, legendary investor, said, "Know what you own, and know why you own it."
Professional Fees: When investing in a company, you have to deal with accountants, financial advisors, or lawyers, and this is likely to eat into your profits.

Strategies to Maximize Your Corporate Investments

Here are some of the strategies to invest smartly within your corporation, with a nod to Canadian entrepreneurship statistics and growth strategies:

Work with Experts: A 2023 survey by BDC found that 62% of Canadian small business owners who sought professional financial advice reported higher profitability. At Online Accountant, we craft tailored investment plans that align with your risk tolerance and business goals.
Prioritize RRSP Contributions: Contribute as much as possible in RRSP, particularly in case you are in a high tax bracket prior to investing corporately. RRSPs are tax-exempt, and the tax is paid at a later retirement.
Explore Low-Risk Options: Smaller banks or credit unions also provide GICs or high-interest savings accounts that tend to provide a greater rate of return than big banks and with fewer associated fees.
Consider Real Estate: Corporate real estate investments, like commercial properties, can generate steady income, but watch out for passive income limits.
Use Online Brokerages: Online platforms offer corporate accounts with low fees, letting you manage investments without breaking the bank.
Monitor Passive Income: Keep passive income below $50,000 annually to preserve the SBD. A CPA can help you structure investments to minimize tax leakage.

Real-World Insights: What the Numbers Say

Statistics Canada (2024) indicated that small businesses (less than 100 employees) comprised 97.9 percent of all businesses in Canada and they employed 63.8 percent of the workforce. However, just 16 per cent of such businesses are actively participating in the investment of surplus money in the financial market, losing the possibility to build wealth.

According to a 2022 report released by the Canadian Federation of Independent Business (CFIB), 45 percent of small business owners cited the lack of financial knowledge as a challenge to corporate investing.

That is where we can step in! With Online Accountant, we bring a clear picture of the accounting world, providing cloud-based specialist accounting and advisory services to keep your accounts in order.

A Word on Cryptocurrency: Proceed with Caution

Curious about crypto? It’s a hot topic, but it’s risky for corporate accounts. The CRA treats cryptocurrency transactions as taxable events, and frequent trading may be deemed business income, not capital gains. With 60% of Canadian small businesses reporting losses from crypto investments in 2021 (CPA Canada, 2022), it’s a high-stakes game. Consult with us before diving in.

Real-World Insights: What the Numbers Say

We are not number-crunchers at Online Accountant; we are people who help you to put up a financial empire. With our solutions in the cloud, which are based on such tools as Xero and QuickBooks Online, you can have real-time information about your corporate finance. Tell us what you need with regard to tax planning, investment strategies or compliance with the CRA regulations, and we will take care of it.

Final Thoughts: Is It Worth It?

Investing in your small business corporation account in Canada can be a brilliant move, but it’s not a one-size-fits-all solution. The tax deferral, diversification, and LCGE benefits are compelling, but high passive income taxes and compliance complexities require careful planning. With the right strategy and expert guidance, you can turn your corporation into a wealth-building machine.

Ready to make your money work harder? Contact Online Accountant today for a free consultation. Let’s come with a plan that maximizes your returns and keeps the CRA happy. Don’t let your profits snooze: invest smart, grow big, and level up the financial game!

References

BDC. (2023). Small Business Financial Survey 2023. Business Development Bank of Canada.
Canada Revenue Agency. (2025). Corporation Tax Rates. Retrieved from https://www.canada.ca/en/revenue-agency.html
Canadian Federation of Independent Business. (2022). Small Business Investment Trends. CFIB Research Report.
FBC. (2025). The Ultimate Guide to Incorporated Small Business in Canada. Retrieved from
Khanna, R. (2024). Small-Business-Tax-Resources. Montreal Financial.
McCay Duff. (2024). Is Investing Through Corporation Tax Efficient? CPA Blog.
Scotiabank. (2021). Investment Strategies for Small Business Owners.
Small Business BC. (2022). Should I Invest Inside My Canadian Small Business Corporation Account?
Statistics Canada. (2024). Key Small Business Statistics. Government of Canada.
True North Accounting. (2022). Cryptocurrency in Canada: Considerations for a Small Business Owner.