Should I incorporate before I start doing business in Ontario, or can I wait?

Many entrepreneurs start operating as sole proprietors, build some revenue, and then incorporate later. There is no law requiring you to incorporate before you start a business in Ontario, and for very early-stage or low-risk activities, operating as a sole proprietor or in partnership while you test the concept is perfectly reasonable.

That said, there are situations where incorporating before you start is clearly better. If your business involves personal injury risk, product liability, or contractual obligations where things could go wrong, the liability protection of a corporation is valuable from day one. Once you begin earning meaningful revenue, the tax deferral available through a corporation can also make early incorporation worthwhile — income earned inside the corporation at the corporate tax rate may result in less tax than earning that same amount personally.

Another consideration is optics and contracts. Some clients, particularly other businesses and government agencies, prefer dealing with a corporation. Having a corporate name on contracts can make the business appear more established.

The main cost of waiting is that income earned before incorporation is taxable personally and cannot be "moved" retroactively into the corporation. And if something goes wrong before you incorporate, personal assets are exposed. A brief consultation with both a business lawyer and an accountant is the most efficient way to decide the right timing for your specific situation.