The honest answer: if you are earning modestly and taking little risk, a sole proprietorship is fine. Incorporate when liability, tax deferral or an eventual sale start to matter. Those thresholds arrive at different times for different businesses, and the tax argument is weaker than most people assume.
Our charges include applicable taxes. Disbursements are extra and billed at cost — itemized upfront, in writing, never hidden.
From $1,128.87 taxes included
A sole proprietorship is you. There is no line between the business and your personal affairs. A judgment against the business is a judgment against you, and it can be enforced against your bank account and your house.
A corporation is a separate legal person and its debts are its own. That separation is real, but it has three well-known holes. Personal guarantees — landlords and lenders ask for them almost every time, and a guarantee puts you back on the hook. Your own conduct — incorporating does not stop someone suing you for what you personally did badly. And statutory director liabilities for unremitted source deductions, HST and unpaid employee wages.
So start by asking what can actually go wrong. A consultant writing reports carries a different risk profile from a roofer, or from a business with staff, a lease and inventory. Insurance and incorporation are complements, not substitutes: insurance pays claims, the corporate structure limits what a claim can reach.
Sole proprietorship income is your income. It is taxed at your personal marginal rate in the year it is earned, whether or not you took the money out of the business. You report it on a business schedule with your personal return.
A corporation is taxed separately, and active business income up to the small business limit is taxed at a low combined federal and Ontario rate. Leave profit in the company and you defer the difference until you take it out as salary or dividends. Take everything out every year and integration puts you in roughly the same place as a sole proprietor — with an extra set of accounting fees you did not need.
That is the real test: incorporation pays off when the business earns more than you spend. It also matters if you might sell. The lifetime capital gains exemption applies to shares of a qualified small business corporation, and a sole proprietorship has no shares to sell. Have an accountant run your actual numbers before you decide — this is one of the few areas where a generic answer is worthless.
Sole proprietorship: register a business name if you trade under one ($60, five years), keep books, file a business schedule with your personal return. That is close to the whole obligation.
Corporation: $300 to incorporate, plus a NUANS report if you want a chosen name, plus a minute book that somebody has to maintain, plus a T2 corporate tax return every year whether or not you earned anything, plus an Ontario annual return within six months of fiscal year end, plus a transparency register of individuals with significant control since 1 January 2023, plus 15-day reporting of director, officer and address changes.
The recurring accounting cost is the figure people underestimate. A corporate year end is not a personal return with extra steps — it is a different piece of work at a different price. Get a quote for annual corporate accounting before you incorporate, not after the first invoice arrives.
Most people move when something forces it: a customer or insurer that will only contract with a corporation, a lender asking, or profits that finally exceed what they draw. Moving is straightforward in outline — incorporate, then transfer the business assets and goodwill into the company.
That transfer is a disposition for tax purposes. Done carelessly it can trigger tax on accrued goodwill you have not turned into cash. A section 85 rollover lets you transfer the assets to the corporation in exchange for shares at an elected amount and defer that gain. It is a joint election filed with the CRA and it has a filing deadline, so it is planned before the transfer, not discovered afterwards.
Then the practical carryover, which is where transitions actually go wrong: contracts assigned to the corporation, the lease assigned or consented to, a new bank account, HST and payroll accounts under the corporation's business number, insurance reissued in the corporate name, and the business name re-registered under the corporation if you keep trading under it.
There is no universal number, and anyone who gives you one without seeing your figures is guessing. The tax benefit is deferral, so it only bites when the business earns meaningfully more than you withdraw for living expenses. If you take out everything you make, incorporating usually costs more in accounting than it saves in tax. If profits are accumulating, or you have real liability exposure, or you can foresee selling, the calculation changes. Ask an accountant to model your specific numbers.
Usually, from ordinary business debts — but not from personal guarantees you have signed, not from your own negligence, and not from director liabilities for source deductions, HST and unpaid wages. Landlords and lenders routinely require guarantees from small-business owners, which reinstates personal exposure for the largest obligations. Incorporation plus adequate liability insurance is the combination that actually works.
Yes, and it is common. Incorporate, then transfer the assets and goodwill to the new company. Because the transfer is a disposition at fair market value by default, the usual route is a section 85 rollover — a joint election with the CRA that lets you transfer at an elected amount in exchange for shares and defer the gain. It has a filing deadline and it should be set up with your accountant and lawyer together before the assets move.
Only if the corporation trades under something other than its exact corporate name. 1234567 Ontario Inc. selling as Riverside Bakery must register Riverside Bakery under the Business Names Act — $60, five years. If the corporation always uses its full legal name on invoices, contracts and signage, no separate registration is required.
Our corporate work starts at $1,128.87, taxes included, published on our pricing page. Government fees are extra and billed at cost — currently $300 to incorporate in Ontario and $60 for a business name registration.
Open your file tonight — a licensed Ontario lawyer will confirm everything with you by tomorrow.