The Money Is Just Sitting in My Corporation. What Should I Do With It?

Leaving surplus cash in your corporation isn't a mistake: it was taxed at the lower corporate rate, and personal tax is deferred until it comes out. But idle cash loses ground to inflation, investment income inside a corporation is taxed at roughly 50% up front, and once passive income passes $50,000 a year the corporation starts losing its small business tax rate. Giving the money a job is what matters: investing inside, a holding company, a pension plan, corporate-owned insurance, or paying it out over time.

“Right now? It’s just sitting there”

Most owners who say this did nothing wrong. The business made more than they needed, they left it in, and every year the balance grew. Nobody said “retained earnings”; it was just savings in the company. The question usually shows up when the balance gets large enough that leaving it idle starts to feel like a decision in itself.

What leaving it idle costs

• Inflation. Cash in a business account earns little. Over a decade, its buying power shrinks.
• Tax on investment income. Interest, rent and the taxable half of capital gains earned inside a private corporation are taxed at roughly 50% up front. Part is refunded when the corporation pays you taxable dividends.
• The $50,000 line. Above $50,000 of passive income in a year, the corporation's small business limit shrinks by $5 for every $1 over. Ontario and New Brunswick didn't adopt the rule for their provincial rate. See passive income and the small business deduction.
• A future sale. A company carrying lots of cash and investments may not qualify for the Lifetime Capital Gains Exemption when you sell. Moving passive assets out takes time. See why selling rarely funds retirement.

The options owners use

Option	What it does	Trade-off
Keep a cash reserve	Covers slow months, opportunities and emergencies	Earns little; size it to a real need
Invest inside the corporation	Grows with corporate dollars that have only been taxed once	Investment income is taxed at about 50% up front and counts toward the $50,000 line
Move surplus to a holding company	Separates savings from business risk and can help keep the operating company clean for a sale	Set-up and accounting costs; get the structure right first. See holding company vs family trust
Fund an Individual Pension Plan	Deductible contributions move money into a registered plan in your name	Needs T4 salary history; actuarial costs. See IPPs
Corporate-owned permanent life insurance	Growth inside an exempt policy is tax-sheltered and isn't passive income; at death, most of the benefit can reach your family through the capital dividend account	A long-term commitment with a cost of insurance; only fits money you won't need for many years. See where it fits
Pay it out gradually	Moves money to you in years and amounts that keep your personal rate down	Personal tax on each draw. See getting money out

The first questions we ask

When an owner tells us the money is just sitting there, Greg usually asks two things before anything else: what is the money doing today (a chequing account, GICs?), and will you need it in the next three to five years? In his experience, owners start asking once a surplus has built up for a few years, and the questions tend to be the same: should it be invested, put into life insurance, or just taken out as a dividend? For money that can be left for the long term in a corporate-owned policy, Greg's usual suggestion is to put in a fraction of the surplus, not all of it every year, just so that part is doing something.

Who this is for, and who it isn't

Run your own numbers

Questions to ask your accountant

• How much of our cash is a working reserve, and how much is true surplus?
• How much passive income did we earn last year, across all associated corporations?
• Would our shares qualify for the Lifetime Capital Gains Exemption if we sold today?
• Should surplus move to a holding company, and what would that cost to set up?

Related guides

Frequently asked questions

Is it bad to leave money in my corporation?

Not by itself. Money left in the corporation has been taxed at the lower corporate rate, and personal tax is deferred. The costs come from leaving it idle, from tax on investment income inside the corporation, and from the passive income rules once investment income passes $50,000 a year.

How is investment income taxed inside a Canadian corporation?

Interest, rent and the taxable half of capital gains earned by a Canadian-controlled private corporation are taxed at roughly 50% up front. Part of that tax is refunded when the corporation pays taxable dividends to shareholders.

What happens when passive income in my corporation goes over $50,000?

The federal small business limit shrinks by $5 for every $1 of passive income over $50,000 in the prior year, and is gone at $150,000. Ontario and New Brunswick didn't adopt the rule for their provincial small business rates.

How is Dundas Wealth paid?

Dundas Wealth is an insurance brokerage (Dundas Life Inc., FSRA #37628M). The strategy session is free. If a life insurance policy is part of your plan and you decide to go ahead, the insurance carrier pays us a commission when the policy is placed. You don't pay us a fee, and if your structure is already right, your one-page brief will say so.

Figures are current as of 2026 and are general information, not tax, legal or investment advice. Rules and rates change, and how they apply depends on your facts. Confirm anything here with your accountant before acting. Dundas Wealth is an insurance brokerage (Dundas Life Inc., FSRA #37628M). We are paid by the insurance carrier if and when a policy is placed.