What Happens When You Try to Withdraw $500,000 from Your Corporation

The Withdrawal Problem That Nobody Calculates Until It Is Too Late

One of the most jarring moments in an incorporated entrepreneur's financial life is the first time they try to access a large sum of capital from their corporation — for a real estate purchase, a business acquisition, or simply to fund a lifestyle upgrade — and discover the true tax cost of extraction. The corporation has the money. The entrepreneur needs the money. The problem is the bridge between those two facts.

In Canada, there is no mechanism to simply 'take money out of your corporation' without a taxable event. The corporation is a separate legal entity. Every transfer of value from the corporation to the individual shareholder must flow through one of a limited set of channels: salary, dividend, shareholder loan repayment, or return of paid-up capital. Each of these has different tax consequences — but all of them involve paying tax.

The Math on a $500,000 Withdrawal

Consider an incorporated entrepreneur in Quebec who wants to access $500,000 from their corporation. If they extract it as salary, they are adding $500,000 to their personal income for the year. In Quebec, the combined federal and provincial marginal tax rate on income above approximately $246,000 is around 53.31%. Extracting $500,000 as salary could generate a personal tax bill of $180,000 to $230,000 — depending on other income in the year — leaving the entrepreneur with $270,000 to $320,000 of the $500,000 they needed.

If they extract via eligible dividends, the effective tax rate is lower — approximately 40% in Quebec on the dividend portion above lower brackets — but the corporation also loses the refundable dividend tax previously paid, and the mechanics become complex. In either case, the entrepreneur is transferring $150,000 to $250,000 to the government to access money that is already sitting in a corporation they own.

Extracting $500,000 from a Quebec private corporation as salary could result in a personal tax bill exceeding $200,000 — meaning the entrepreneur receives less than $300,000 of the $500,000 they were trying to access.

The Policy Loan Alternative: Access Without the Tax Bill

Inside the InfiniCap System™, the same $500,000 is accessed differently. The corporation's participating whole life policy has accumulated cash value. The insurer provides a policy loan against that cash value — the loan proceeds flow to the corporation as a non-taxable receipt. The corporation then provides the funds to the shareholder, or uses them directly for the intended purpose.

No personal income tax is triggered. No dividend tax. No salary inclusion. The $500,000 is the $500,000 — not $500,000 minus $200,000. The capital inside the policy continues to grow during the loan period, because the policy loan does not reduce the internal cash value that the insurer is compounding. The entrepreneur has used their capital in two places simultaneously.

The Discipline Required and the Long Game

This is not a frictionless mechanism. Building the policy cash value to a level that supports $500,000 in liquidity requires years of structured premium payments. It requires a commitment to the architecture over the short-term temptation to extract capital and pay the tax. And it requires understanding that the policy loan is a real debt that must eventually be settled — either through repayment during the entrepreneur's lifetime or from the death benefit at the end.

For entrepreneurs who think in decades rather than quarters, the calculus is clear. Every dollar that flows through the InfiniCap System™ rather than through a taxable salary or dividend distribution represents a permanent structural advantage — compounding over time in a tax-deferred environment rather than being reduced by extraction tax and restarting from a lower base.