Five Mistakes First-Time Incorporators Make in Canada
Open Corporation for $35 is a department of Gondaliya CPA. Filing the articles is the easy part of incorporating. The mistakes that cost money happen around it: a share structure that cannot take a second owner, a registry filing nobody mentioned, an HST registration that came too late. This post walks through the five we see most often in a corporation’s first year, and what each one costs to put right. We prepare and file your articles for $35.00, HST included, with the government fee charged at cost.
Quick Summary
| Mistake | What it costs to fix |
|---|---|
| Incorporating before it pays | A T2 return and registry filings every year, for a tax saving you may not get |
| One class of shares and no plan | Articles of amendment: $200.00 federally online, or $150.00 in Ontario, plus a special resolution |
| Missing the Ontario Initial Return | No government fee, but the corporation’s record falls out of date |
| Registering for HST too late | The HST on sales already made, paid by the corporation if it cannot collect it |
| Mixing personal and corporate money | Withdrawals can be added to your personal income as a shareholder loan |
Reading time: 8 minutes.
Table of Contents
This post covers Ontario and federal corporations, with figures in Canadian dollars as at October 2026. Government fees and tax thresholds change. It is general information, not tax or legal advice, so speak with a CPA about your own situation before filing.
Mistake 1: Incorporating before it pays
Incorporating before it pays
Timing
Incorporating does not lower your tax by itself. What it does is let profit stay inside the corporation at a lower rate until you take it out. In Ontario the combined rate on active business income within the $500,000 small business limit is 11.2 percent from July 1, 2026.
The catch is the word stay. If you need every dollar the business earns to live on, the money comes straight out as salary or dividends and is taxed in your hands anyway. The saving shrinks to very little, while the costs do not.
A corporation files a T2 corporate tax return every year, even with no income. It files registry returns, keeps a minute book and runs its own bank account. Those are real costs in time and fees.
Some of our most useful consultations end with us telling someone not to incorporate yet. If you have no liability worry, no partner coming in and no profit to leave in the company, waiting a year costs you nothing.
Our small business deduction guide explains the lower rate, and our guide to incorporating in Canada sets out the steps once the timing is right.
Mistake 2: One class of shares and no plan
One class of shares and no plan
Share Structure
The articles of incorporation set out what shares the corporation can issue. Many first-time owners choose a single class of common shares because it is the simplest box to tick.
It works until something changes. A spouse who should hold shares without voting control, a partner buying in, an investor, or a holding company later: each needs a share class that already exists in the articles.
If it does not, the articles have to be amended. That needs a special resolution of the shareholders and a government fee of $200.00 for a federal corporation filed online, or $150.00 in Ontario.
| If you later want to | You need |
|---|---|
| Give a spouse shares without voting control | A non-voting class already in the articles |
| Pay different dividends to different owners | Separate classes that can receive separate dividends |
| Bring in a partner or investor | Room for new shares, and usually a shareholder agreement |
| Add a holding company above the business | Shares the holding company can own |
Dividends paid to family members are tested under the tax on split income rules. A share class makes a dividend possible; it does not make it tax-efficient. Our tax on split income guide explains the tests.
Our share structure guide explains how share classes work and who should hold which shares. Our articles of incorporation guide walks through each item on the form, and a CPA reviews the share classes before we file.
Mistake 3: Missing the Ontario Initial Return
Missing the Ontario Initial Return
Registry
The certificate of incorporation is not the last registry filing. An Ontario corporation must file an Initial Return under the Corporations Information Act within 60 days of incorporating. A federal or out-of-province corporation that starts doing business in Ontario files one within 60 days of starting.
There is no government fee for it, which is why it is easy to forget: nothing prompts you to file it.
After that comes an Annual Return each year, within six months of the fiscal year end, also with no government fee. It is filed directly in the Ontario Business Registry, not with the tax return. A federal corporation files its own annual return with Corporations Canada within 60 days of its anniversary date, for $12.00 online.
| Filing | When | Government fee |
|---|---|---|
| Ontario Initial Return | Within 60 days of incorporating, or of starting business in Ontario | None |
| Ontario Annual Return | Within six months of each fiscal year end | None |
| Federal annual return | Within 60 days of each anniversary date | $12.00 online |
| T2 corporate tax return | Within six months of each fiscal year end | None |
Our Initial Return filing service handles it, and our guide to what happens after you incorporate lists every first-year filing.
Mistake 4: Registering for HST too late
Registering for HST too late
Sales Tax
A new corporation does not have to register for GST/HST while it is a small supplier. That ends once its taxable sales go over $30,000, either in a single calendar quarter or over the last four calendar quarters together.
The two tests start the clock differently. Go over $30,000 in one quarter and you must charge HST on the very sale that took you over. Go over across four quarters and you start charging after the end of the following month. Either way, you register within 29 days.
The cost of being late is simple. HST you should have charged is still owed, and if you cannot collect it from the customer afterwards, the corporation pays it from its own money. In Ontario that is 13 percent of the sale.
If your customers are businesses registered for HST, consider registering voluntarily from day one. You can then claim back the HST you pay on your own costs, and your customers claim back what you charge them.
Our GST/HST registration guide covers the rules, filing frequency and the Quick Method.
Mistake 5: Mixing personal and corporate money
Mixing personal and corporate money
Bookkeeping
A corporation is a separate person in law. Its bank account is not your account, even if you own every share.
Paying personal bills from the corporate account, or taking money out without recording it as salary or a dividend, creates a debt from you to the corporation, called a shareholder loan. If it is not repaid within one year after the end of the corporation’s tax year, it is generally added to your personal income, with no deduction for the corporation.
The fix is a habit, not a filing. Open a separate business account the day the corporation exists, pay yourself by salary or dividend, and keep receipts for every business expense.
Our business bank account guide covers opening the account, and our salary against dividends guide explains how to pay yourself.
Get the structure right before you file
We prepare and file your articles for $35.00, HST included, with the government fee charged at cost. A CPA checks the share structure and the first-year deadlines before anything is filed.
Frequently asked questions
FAQ
What is the most common mistake when incorporating in Canada?+
Setting up one class of common shares with no thought about who else may hold shares later. Changing the share structure afterwards needs articles of amendment and a government fee of $200.00 federally online, or $150.00 in Ontario, plus a special resolution of the shareholders.
Is it a mistake to incorporate too early?+
It can be. A corporation saves tax mainly by leaving profit inside it at the lower corporate rate. If you take out everything you earn to live on, you pay personal tax anyway, while adding a T2 return and annual filings every year.
What happens if I forget the Ontario Initial Return?+
An Ontario corporation, and a federal or out-of-province corporation that starts doing business in Ontario, must file an Initial Return within 60 days. There is no government fee. Leaving registry filings undone can eventually lead to the corporation being cancelled.
When must a new corporation register for HST?+
Once its taxable sales go over $30,000 in a single calendar quarter or over the last four consecutive calendar quarters. It must register within 29 days of the first sale made after that. Registering earlier, voluntarily, is allowed.
Can I pay personal expenses from my corporation’s bank account?+
You can, but it creates a shareholder loan. A loan to a shareholder that is not repaid within one year after the end of the corporation’s tax year is generally added to the shareholder’s personal income. Keep the accounts separate and record any withdrawals properly.
Does a corporation with no income still file a tax return?+
Yes. Every corporation resident in Canada files a T2 return for every tax year, even with no income and no tax owing. The return is due six months after the end of the tax year.
Decide whether incorporating helps you before you decide how to do it. If it does, settle the share classes and the first-year calendar before filing, open a separate bank account on day one, and watch the $30,000 HST threshold. Everything else can be adjusted later.
What to send us
Send us who will hold shares, whether anyone else may join later, where each director lives, what you expect to earn in the first year, and whether your customers are businesses or consumers. That is enough for us to set up the articles and your first-year calendar. Start on our incorporation form or see every fee on our pricing page.
Published: October 15, 2026 · Last updated: October 15, 2026
Editorial policy: Our content is prepared by our team and reviewed by Sharad Gondaliya, CPA, and we update it as government fees, tax rates and CRA thresholds change.
Disclaimer: This article is general information only and is not tax, legal or financial advice. Gondaliya CPA Professional Corporation is a firm of Chartered Professional Accountants, not a law firm. Please consult a CPA before acting, and a lawyer for legal advice.
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Open Corporation for $35 is a department of Gondaliya CPA.
