Putting Yourself on Payroll as an Ontario Owner-Manager: How It Works

If you run your own Ontario corporation, at some point you'll decide how to actually get paid — and one option is putting yourself on the corporation's payroll, drawing a T4 salary the same way an arm's-length employee would. Mechanically, this is one of the more straightforward parts of owner-manager tax planning; it's also one that owners sometimes get sloppy about precisely because they're paying themselves.

This article focuses on the CRA mechanics of running your own salary through payroll — not on the separate, more nuanced question of whether salary or dividends make more financial sense for you, which depends on your personal circumstances and is worth discussing with your accountant.

Why Owner-Managers Put Themselves on Payroll

A corporation is a separate legal person from its owner, even when the owner runs the entire business day to day. If you want to draw income from your corporation as salary rather than as a dividend, that salary is treated exactly like any other employee's wages for CRA purposes — which means the corporation, as employer, has the same payroll obligations toward you that it would toward any other staff member.

The Mechanics: A T4 Salary Like Any Other Employee

Once you decide to pay yourself a salary, your corporation follows the same steps it would for hiring any employee:

1. Register (or use the existing) CRA payroll program account.
2. Complete your own TD1 and TD1ON forms — yes, even though you're the owner.
3. Set your salary amount and pay frequency, and run it through payroll like any other paycheque.
4. Withhold income tax and CPP contributions from your own pay, the same as for any employee. EI is the exception: employment by a corporation in which you control more than 40% of the voting shares is generally not insurable employment, so EI premiums usually do not apply to an owner-manager's own salary — confirm your own status before setting up payroll.
5. Remit the withheld amounts, plus the corporation's employer share of CPP (and EI, if applicable to your situation), to the CRA on the corporation's remittance schedule.
6. Issue yourself a T4 slip at year-end, exactly as the corporation would for any other employee.

Source Deductions Apply to Your Own Paycheque Too

It's a common misconception that an owner-manager can be more casual about their own withholding because "it's all coming from the same place anyway." It isn't more casual — the corporation is legally required to withhold and remit source deductions on your salary the same way it would for an arm's-length employee, and those withheld amounts are held in trust for the CRA from the moment they're deducted.

One nuance worth noting: because you're paid through your corporation as employer, CPP on your salary is split between the corporation's employer share and your own employee share, the way it would be for any T4 employee — a different structure from a sole proprietor's self-employment income, where there's no separate employer and the individual effectively covers both portions themselves.

Director's Liability If Remittances Fall Behind

Because you're both the owner and, typically, a director, falling behind on remitting the source deductions withheld from your own salary carries the same director's liability exposure as falling behind on any other employee's remittances. Directors of a corporation can become personally liable for the corporation's unremitted source deductions (and separately, unremitted GST/HST) if the corporation fails to remit them. Being the sole owner doesn't reduce this exposure — if anything, it means there's no one else to catch the problem if you don't.

Salary vs. Dividends: A Related but Separate Decision

Many owner-managers eventually compare salary to dividends when deciding how to draw income from their corporation. That comparison involves personal and corporate tax rates, RRSP room, CPP contribution room, and other factors specific to your situation — it's a genuinely separate analysis from the payroll mechanics covered here, and it's worth working through with your accountant rather than assuming one method is automatically better.

Common Pitfalls

• Forgetting to remit source deductions on your own salary because "it's just moving money between accounts I control"
• Blending personal and corporate bank accounts, which makes it harder to demonstrate that a proper payroll process is actually being followed
• Setting an irregular or informal "salary" that doesn't go through payroll at all, which can create confusion about whether it's salary, a dividend, or a shareholder loan
• Not issuing yourself a T4 at year-end to match what was actually withheld and remitted

Frequently asked questions