When should you incorporate in Ontario?

Incorporation is worth it when the company, not your household, should own the risk and the retained profit. It is a poor trade when profit is small, you need every dollar to live on, and you do not want a minute book, a T2, and a separate bank account.

Three reasons that actually matter

If you will withdraw everything as salary, you mostly get liability protection and extra compliance cost. Run both numbers in the incorporation calculator before you pay for articles.

• Liability. A corporation is a separate person. Trade creditors and many contracts stop at the company — personal guarantees and some professional liability still follow you.
• Tax on money you leave in the company. Active business income up to the small-business limit is taxed at a combined federal and Ontario rate of about 12.2%, far below personal rates once you are out of the first bracket.
• Credibility. Landlords, suppliers, and some clients insist on dealing with a corporation. A named corporation ($950 + HST at Tax Everyday) is easier to brand than a numbered one ($850 + HST).

Federal or Ontario

Ontario incorporation is enough for a business that lives in the province. Federal incorporation helps if the exact name must be protected across Canada. Federal corporations still need at least 25% of directors to be resident Canadians. Ontario no longer has that residency test.

Either way the registry needs a name, a registered office in the jurisdiction, directors’ names and residential addresses, a share structure, and an incorporator. That is the form on our incorporation page — nothing decorative, only what the filing needs.