Introduction
A lawyer whose professional corporation earns $350,000 in net income — after LSO fees, LawPRO, office overhead, and staff — is in the mid-range of incorporated professional earnings. The SBD is fully available. Personal income needs vary widely at this level, but the planning levers are clear.
The Corporate Starting Position
On $350,000 of net active income, the professional corporation pays the small business deduction rate — approximately 12.2% combined in Ontario. Corporate tax: approximately $42,700. After-tax retained corporate income: approximately $307,300.
The Compensation Decision
Option A — Salary of $150,000 to maximise RRSP room
At $180,500+ of salary, the full 2026 RRSP room is generated ($32,490). A $150,000 salary generates $27,000 of RRSP room — close to the maximum.
Personal tax on $150,000: approximately $44,000. CPP: approximately $7,735. RRSP contribution of $27,000 (funded from the salary) saves approximately $12,500 in personal tax (at a ~46% marginal rate). Net personal tax after RRSP deduction: approximately $31,500.
Corporate retention: approximately $165,000 after corporate tax and salary/CPP payments.
Option B — Salary of $80,000, dividends of $70,000, retain $200,000
Salary of $80,000: personal tax approximately $18,500, CPP approximately $7,735, RRSP room $14,400.
Non-eligible dividends of $70,000: personal tax approximately $17,300.
Total personal tax: approximately $35,800 plus $7,735 CPP.
Corporate retention: approximately $175,000–$185,000.
What Makes Sense at $350,000
At this income level, the compensation decision turns significantly on two factors: how much personal income the lawyer needs, and whether retirement planning via RRSP is a priority.
For a lawyer in their 30s or 40s with significant RRSP room not yet accumulated, Option A — maximising RRSP contributions — provides a tax-sheltered growth vehicle that compounds for decades. The RRSP contribution saves real tax today at a ~46% marginal rate, and the invested RRSP compounds tax-free.
For a lawyer in their 50s who has already maximised RRSP contributions in prior years and has limited remaining room, Option B — lower salary, supplemented by dividends — may be more appropriate. The CPP cost is avoided, and the personal income is drawn at a lower marginal rate.
The TOSI Landscape for Lawyers
As discussed in Article A5, the TOSI rules limit the ability to distribute income to a spouse who is not actively engaged in the practice. For a lawyer at $350,000, with a spouse who does not work in the practice, dividend income to the spouse through the professional corporation would be subject to TOSI — taxed at the top marginal rate regardless of the spouse's actual income level.
The primary income-splitting mechanism remaining for lawyers in this position is the spousal RRSP, which is funded from the lawyer's own earned income but eventually taxed in the spouse's hands at their marginal rate.
The Five-Year Accumulation Picture
At $350,000 of net income, retaining $165,000–$200,000 per year in the corporation, after five years the lawyer has $825,000–$1,000,000 in corporate retained earnings. At that level, passive income of $40,000–$50,000 per year is possible — approaching the SBD threshold. Year six is when the holdco conversation should begin.
When to Speak With a CPA
The compensation decision at $350,000 is worth an annual conversation — the right salary level in year three of practice may not be right in year seven when the RRSP is larger, the CPP position is stronger, and the passive income threshold is approaching.