How Much Should I Pay Myself as a Founder in 2026?
- Feb 11
- 3 min read
“We’re finally profitable. There’s money in the account. How much can I take?”
A founder asked me that recently.
On the surface, it sounds like a simple compensation question.
It’s not.
Because most founders aren’t asking about payroll.
They’re asking:
Is the business stable enough to support me?
And this is where I see the same mistake over and over.
Some founders underpay themselves out of fear.
Others land one big contract and immediately increase their pay, only to feel the cash squeeze three months later.
Both are reactions. Neither is strategy.
If you’re incorporated in 2026, compensation is strategic capital allocation.
And the number you choose tells me how you’re actually running the business.
1. Anchor to Profit, Not Revenue
Revenue is vanity.
Profit and cash flow are reality.
If your company generates $400K in revenue but retains $80K after expenses and tax, paying yourself $180K isn't sustainable.
Your compensation should align with:
Sustainable net income
Cash reserves
Upcoming tax obligations
Growth investments
Debt repayments
Strong operators treat their pay as a controlled variable and not an emotional reaction to a good quarter.
2. Your Stage Determines Your Pay
Your compensation must reflect your stage.
Early Stage (Unstable or Tight Cash Flow)
Your goal isn’t lifestyle expansion.
It’s runway.
Pay yourself enough to:
Cover personal baseline expenses
Reduce financial stress
Avoid forcing the business into strain
This is survival compensation. Nothing more.
Growth Stage (Profitable but Reinvesting)
Now we move from survival to structure.
At this stage, you should:
Set a fixed monthly salary
Avoid random withdrawals
Review compensation quarterly
Leave excess profit inside the corporation strategically
Retained earnings aren’t “extra cash.”
They’re future leverage: hiring capacity, marketing expansion, negotiation power.
Mature Stage (Stable and Predictable)
Now we optimize.
This is where salary vs dividends becomes strategic:
Salary creates RRSP room and reduces corporate income tax
Dividends avoid CPP and provide flexibility
Blended compensation can smooth tax brackets
Installment planning becomes critical
At this stage, underpaying yourself can be just as inefficient as overpaying.
3. Stop Paying Yourself Emotionally
Here’s another pattern I see:
A founder lands a large contract and feels like they “earned” a raise.
One big contract is not a raise.
It’s a test of discipline.
If revenue isn’t recurring, your compensation shouldn’t assume it is.
The fastest way to create cash stress is to increase fixed personal costs based on variable business income.
The Tax Reality in 2026
Compensation decisions directly affect:
Corporate tax
Personal marginal tax
CPP contributions
RRSP contribution room
CRA installment requirements
Many founders don’t realize that once personal tax exceeds CRA thresholds for consecutive years, installments become mandatory.
Most tax stress I see isn’t from high income.
It’s from unplanned income.
Planning removes stress.
A Practical Framework
If you want clarity instead of guessing, use this structure:
1. Define your personal baseline.
What do you actually need annually to live responsibly and save properly?
2. Model the business.
After expenses, tax, reinvestment, and reserves, what is sustainably distributable?
3. Create a compensation policy.
Fixed monthly salary
Quarterly review
Strategic year-end bonus or dividend
Installment planning in advance
When compensation becomes policy instead of reaction, everything stabilizes.
Cash flow stabilizes.
Tax planning improves.
Decision-making sharpens.
What’s “Normal” in 2026?
While every case is different, most incorporated founders I see fall into rough patterns:
Early stage: $75K–$150K
Growing services firms: $300K–$500K
Established operators: $1.5M+ structured mix
Those numbers reflect the business's strength. If the business can’t support the number you want, increasing compensation won’t fix that.
Improving margins will.
The Real Question
The better question isn’t:
“How much can I take?”
It’s:
“What does the business sustainably allow — and what does my strategy require?”
If you’re in aggressive growth mode, you retain more earnings.
If you’re building a lifestyle firm, you structure predictable distributions.
If you’re preparing for financing or exit, you optimize retained earnings and profit optics.
Compensation should match strategy.
Not emotion.
If you treat compensation casually, you’ll feel it in your cash flow and your tax bill.
If you treat it strategically, it becomes leverage.
And once you model it properly, the right number becomes obvious.
About Nex CPA
Nex CPA is a boutique Canadian digital accounting firm that provides online accounting solutions by combining technology and forward-thinking businesses. Tailored for the modern entrepreneur, we provide an easy, automated and client-focused service so you can focus on working 'on' the business and not 'in' the business.
For more information, email us at info@nex.cpa
