Sole proprietorship or corporation?
| Sole proprietorship | Corporation | |
|---|---|---|
| Liability for business debts | You are personally liable | Generally limited to the company |
| Tax on business income | Your personal rate | 11.2% in Ontario on the first $500,000 of active income (since July 1, 2026), until paid out |
| Tax returns | T1 with business income | T2 for the company, T1 for owners |
| Yearly cost | Lower | Higher: statements and two returns |
| Selling the business | Sale of assets | Shares may qualify for the lifetime capital gains exemption |
Setting up the corporation properly
There’s more to incorporating than filing articles. The corporation has to follow the rules and be structured for the best tax result, now and when you eventually sell or retire.
- Federal or Ontario incorporation
- Share classes, and who owns them
- Whether a holding company should sit above the operating company
- Business number, HST, payroll and import or export accounts with CRA
- Ontario Business Registry filings and annual returns
- WSIB registration if your industry requires it
- Bank account and bookkeeping set up from the first day
Newcomers starting a business in Canada
Each year thousands of people come to Ontario wanting to start or buy a business. We help with the financial side: how Canadian tax works, registering the business, setting up books and payroll, reviewing businesses and franchises for sale, and preparing for bank financing. We work alongside immigration consultants and lawyers, who advise on immigration status and programs.
Buying an existing business
Before you buy, we review the seller’s financial statements, tax filings and HST accounts, and explain whether buying the shares or the assets is better for you.
Common questions
Should I incorporate my business?
Incorporating usually pays off when your business earns more than you need to live on, because profit left in the company is taxed at a much lower rate than personal income. It also adds cost and paperwork. We look at your income, plans and family situation and show you the numbers before you decide.
Should I incorporate federally or in Ontario?
If you’ll operate mainly in Ontario, a provincial corporation is usually simpler and cheaper. Federal incorporation gives wider name protection across Canada but adds extra filings. We’ll recommend one based on your plans.
I’m new to Canada. Can I start a business?
Often yes, but what you can do depends on your immigration status, so speak with an immigration consultant or lawyer first. Once you’re clear to proceed, we handle the registrations, tax and accounting.
What is the small business deduction?
It’s the lower tax rate on the first $500,000 of active business income earned by a Canadian-controlled private corporation. In Ontario the combined federal and provincial rate on that income has been 11.2% since July 1, 2026 (it was 12.2%; tax years that straddle that date get a blended rate). The $500,000 is shared among associated companies, and it shrinks when the group earned more than $50,000 of passive investment income in the previous year.