The quip, which likened the behaviour of a comedian's dogs to military conduct, irked authorities.
They said Shanghai Xiaoguo Culture Media Co and comic Li Haoshi had "humiliated the people's army".
BBC reports the company accepted the penalty and terminated Mr Li's contract.
The offending remark was made during a stand-up performance in Beijing on Saturday, when Mr Li alluded to two canines he had adopted which were chasing a squirrel.
"Other dogs you see would make you think they are adorable. These two dogs only reminded me of... 'Fight to win, forge exemplary conduct'," said Mr Li, whose stage name is House.
The punchline is part of the slogan that President Xi unveiled in 2013 as a goal for the Chinese military.
In an audio recording of the performance shared on China's Twitter-like platform Weibo, audience members can be heard laughing at the joke.
But it was much less welcome on the internet, after a member of the audience complained about it. Beijing authorities said they launched an investigation on Tuesday.
They then confiscated 1.32m yuan of what was deemed to be illegal income, and fined the company another 13.35m yuan, according to Xinhua.
Shanghai Xiaoguo's activities in the Chinese capital have also been indefinitely suspended.
"We will never allow any company or individual use the Chinese capital as a stage to wantonly slander the glorious image of the PLA [People's Liberation Army]," said the Beijing arm of China's Ministry of Culture and Tourism Bureau.
The audio went viral, with some nationalists saying they were deeply offended and state media also piling on. But others questioned if the reactions were over the top.
"I am patriotic and really don't like others to humiliate our country... But I really don't like this atmosphere where every word about politics is sensitive," reads a post liked 1,200 times.
Mr Li apologised to his more than 136,000 Weibo followers. "I feel deeply shamed and regretful. I will take responsibility, stop all activities, deeply reflect, learn again."
His Weibo account has since been suspended.
The incident sheds light on the challenging climate for Chinese comedians, who have been targeted by authorities and netizens alike.
In late 2020, stand-up comedian Yang Li was accused of "sexism" and "man hating" after making jokes about men. A group claiming to defend men's rights also called on netizens to report her to China's media regulator.