This example follows a Quebec company in a common situation: it does not qualify for the Quebec small business rate — it doesn't meet the province's 5,500 paid-hours test, so in Quebec it pays the general rate while federally (no hours test) it keeps the small business rate — and its owner is paid entirely through dividends, not salary. A profitable year here is not the same as spendable cash: two layers of tax sit between the company and the owner's pocket. Here is what a $100,000 profit really leaves behind.
The Setup
A Quebec-incorporated company launches on January 1 with a December 31 year-end. In its first year it books:
| Sales | $200,000 |
| Operating expenses | ($100,000) |
| Net profit (taxable income) | $100,000 |
Assume every sale is collected and every expense paid, so $100,000 of cash sits in the account on December 31. The owner takes no salary — the $100,000 is operating expenses only.
The Tax Bill
| Federal tax @ 9% (small business rate) | $9,000 |
| Quebec tax @ 11.5% (general rate — no SBD) | $11,500 |
| Total corporate tax (20.5% effective) | $20,500 |
Had it qualified for the Quebec small business rate (~3.2%), provincial tax would have been about $3,200 — failing the hours test costs roughly $8,300 in extra Quebec tax. The Quebec balance is due two months after year-end (end of February); the federal balance follows a month later.
The Second Layer: Getting the Money Out
The $79,500 left after corporate tax still belongs to the company, not the owner. To spend it personally, the owner declares a dividend — and is taxed again. Since the profit was taxed at the small business rate federally, this is a non-eligible dividend. Assuming it is the owner's only income for the year:
| Dividend paid to owner | $79,500 |
| Personal tax (≈ 15.8% effective) | ($12,500) |
| In the owner's pocket | $67,000 |
The dividend is paid in December, so the owner reports it on the year-one personal return and the tax is due April 30.
Year Two, Month by Month
Because year-one tax tops $3,000 at each agency, the corporation must now pay monthly instalments toward year-two tax — about $1,708 a month (last year's $20,500 spread over twelve). Tracking that original $100,000 as one pool, here is where it stands by the end of April:
| Opening — January 1 | $100,000 | |
| Jan 31 — instalment #1 | ($1,708) | $98,292 |
| Feb 28 — Quebec balance + instalment #2 | ($13,208) | $85,083 |
| Mar 31 — federal balance + instalment #3 | ($10,708) | $74,375 |
| Apr 30 — personal tax + instalment #4 | ($14,232) | $60,143 |
| Cash on hand, end of April | $60,143 |
Of that $60,143, about $6,800 is prepaid year-two tax — the four instalments — sitting with the tax authorities as a credit against next year's bill, not lost. The permanent cost of the year-one profit stays at $33,000, so its true value is still ~$67,000; the dip to $60,000 is simply next year's tax paid ahead.
Takeaway: A $100,000 profit funds roughly $67,000 of spendable cash — and by the end of April, three separate tax deadlines have already come and gone. Set money aside for corporate tax as you earn it, budget for instalments once you're past year one, and plan the dividend deliberately. Retained profit is never spending money.