Corporation vs partnership: which one suits your business
Compared on liability, tax and filings. An Ontario partnership registers for $60.00. A corporation costs $300.00 plus our $35.00 fee, HST included.
Two or more people starting something together choose between a partnership, where each partner is an agent of the others and joint and several liability under the Partnerships Act, R.S.O. 1990, c. P.5 reaches personal assets, and a corporation, where shareholders sit behind a separate legal person. Profit, risk and paperwork all follow from that one choice. Open Corporation for $35 is a department of Gondaliya CPA. Where incorporating is the right call, we draft and file the articles for $35.00 with HST included, and the government fee is passed on untouched: $300.00 to the Ontario Business Registry, or $200.00 to Corporations Canada.
The short answer
A partnership suits two or more people running a low-risk business together, because a general partnership business name costs $60.00 to register in Ontario for a five-year term and each partner reports their share of the profit on a personal T1 return. A corporation suits owners who carry real liability or who want to control when profit is taxed, because a corporation is a separate legal person under the OBCA or the CBCA while every partner in a general partnership is personally liable for the firm’s debts under the Partnerships Act, R.S.O. 1990, c. P.5. The first trigger to incorporate is liability, and it does not wait for a profit figure. The second is retained profit, because a Canadian-controlled private corporation pays a federal net rate of 9 percent on active business income up to the $500,000 business limit, while partners pay personal rates on every dollar allocated to them, drawn or not. See what incorporation costs in Ontario for the full breakdown. A limited partnership under the Limited Partnerships Act, R.S.O. 1990, c. L.16 limits only the passive partners. Neither structure replaces insurance or a written agreement between the owners.
Price, line by line
| Item | Option A: partnership (Ontario) | Option B: corporation (Ontario, OBCA) | Difference |
|---|---|---|---|
| Government registration fee | $60.00 business name registration for a general partnership or an LLP, five-year term, Ontario Business Registry. No HST is added to registry fees | $300.00 Articles of Incorporation filed online, Ontario Business Registry. No HST is added to registry fees | $240.00 more to incorporate |
| Limited partnership instead, government fee | $210.00 registration or renewal, five-year term, Ontario Business Registry | Not applicable | A limited partnership costs $150.00 more than a general partnership |
| Federal alternative, government fee | Not available. A partnership is registered provincially | $200.00 to Corporations Canada for a standard online CBCA filing, name search included. No HST is added to registry fees | Federal is $100.00 cheaper than Ontario at the registry |
| Our professional fee | Quoted on request | $35.00, HST included. That is the whole professional fee | Only one side has an approved published fee |
| Name search | No Ontario-biased NUANS report is required to register a partnership business name. Price of any optional search: not confirmed | $0.00 for a numbered corporation. Ontario-biased NUANS report required for a named corporation: not confirmed, priced by the private search house | Not comparable until the search house quotes |
| Total to start, general partnership or numbered corporation | $60.00 plus our fee, quoted on request | $335.00, being $300.00 plus $35.00 including HST | $275.00, plus whatever the partnership service fee is set at |
| Recurring government fee | $60.00 every five years to renew the business name, or $210.00 every five years for a limited partnership | $0.00 Ontario Annual Return under the Corporations Information Act. $12.00 if the corporation is federal | Ontario charges a corporation nothing yearly. The renewal falls on the partnership |
| Certificate of Status | Not applicable | $26.00 at cost, Ontario Business Registry | Banks and landlords ask corporations for this |
| Corporation Profile Report | Not applicable | $8.00 at cost, Ontario Business Registry | Only a corporation has one |
| Agreement between the owners | A partnership agreement, drafted by a lawyer. Not a fee we charge or quote | A shareholder agreement, drafted by a lawyer. Not a fee we charge or quote | Identical. We are a CPA firm and draft neither |
| Minute book | Not required | Required by the OBCA. Our fee: quoted on request | A cost the partnership does not carry |
| Annual tax return | No T2. Each partner reports their allocated share on their own T1. A T5013 Partnership Information Return is required where the Canada Revenue Agency’s filing tests are met: threshold not confirmed. Our preparation fee: quoted on request | A separate T2 corporate return is required every year. Our preparation fee: quoted on request | The corporation always files. The partnership files only if it meets the test |
| Ongoing subscription | $0.00. None | $0.00. None | $0.00. Identical |
Prices verified on 7 September 2026. Competitor pricing changes; the reviewer re-checks this table quarterly. The same figures at cost are on our pricing page and in the Government fees 2026 register.
Feature by feature
| Feature | Option A: partnership | Option B: corporation |
|---|---|---|
| Legal status | Not a separate legal person from its partners | A separate legal person from its shareholders |
| Governing statute | Partnerships Act (Ontario) for a general partnership or an LLP, Limited Partnerships Act for a limited partnership, with the Business Names Act for the name | OBCA in Ontario, or the CBCA federally |
| Registry | Ontario Business Registry | Ontario Business Registry, or Corporations Canada |
| Government fee to start | $60.00 general partnership or LLP. $210.00 limited partnership | $300.00 Ontario, or $200.00 federal |
| Registry processing time | Immediate online, per the Ontario Business Registry | Immediate online in Ontario. One business day federally, per Corporations Canada |
| Liability for business debts | Every partner in a general partnership is personally liable, without limit, under the Partnerships Act | The corporation’s own, subject to guarantees you sign and to director liabilities |
| Liability for what a co-owner does | Each partner binds the firm, so one partner’s contract or mistake reaches the others. An Ontario LLP limits that exposure and is open only where the profession’s governing Act permits it | Shareholders are not liable for each other’s acts |
| Number of owners | Two or more. A partnership cannot have a single partner | One or many, through share classes |
| How ownership is recorded | In the partnership agreement, which is private and unfiled | In shares, recorded in the securities register |
| Bringing in or removing an owner | The agreement is amended, and the firm may dissolve when a partner leaves unless the agreement says otherwise | Shares are issued or transferred, and the corporation continues |
| Name protection | Registration does not grant exclusive rights to the name | Ontario protects the corporate name provincially. A CBCA name is protected across Canada |
| Renewal of the name | Every five years, $60.00, or $210.00 for a limited partnership | None. The name lasts while the corporation exists |
| How profit is taxed | Income is computed at the partnership level under section 96 of the Income Tax Act, then allocated to the partners, who pay personal rates on their share | Inside the corporation first, then again when it is paid out to a shareholder |
| Rate on the first $500,000 of active business income | Not applicable. Personal rates apply to each partner’s allocated share | Federal net rate of 9 percent for a CCPC claiming the small business deduction, per the Canada Revenue Agency |
| Ability to leave profit in the business | No. A partner is taxed on the allocated share whether it is drawn or not | Yes. Tax on the retained portion is deferred until it is paid out |
| Early-year losses | The allocated loss is deductible against that partner’s other personal income in the year | Trapped in the corporation and carried forward against its own future income |
| Paying yourself | Drawings against your profit share. A partner is not an employee of the firm and gets no T4 | Salary, dividends, or both, decided each year |
| Payroll account with the CRA | Needed to pay staff. A partner’s own draw is not payroll | Needed if you pay yourself a salary, and if you hire staff |
| HST registration | Required once the partnership’s taxable supplies pass $30,000 over four consecutive calendar quarters, per the CRA | The same $30,000 test, measured on the corporation |
| Year end | 31 December where the partners are individuals | Any date the first directors choose, within the CRA’s limits |
| Annual filing with the government | A T5013 Partnership Information Return where the CRA’s filing tests are met, plus the five-yearly name renewal | Ontario Annual Return within six months of fiscal year end at $0.00, or the federal annual return within 60 days of the anniversary at $12.00 |
| Minute book and registers | None required | Required, including the securities register |
| Register of individuals with significant control | Not required | Required. In Ontario since 1 January 2023, federally since June 2019 |
| Selling the business | A partnership interest or the underlying assets are sold | Shares may qualify for the lifetime capital gains exemption under the Income Tax Act |
| Winding it down | Dissolution follows the agreement or the Partnerships Act, and the name registration is cancelled | A formal dissolution filing and a final T2 |
| Who to call in a CRA audit | Whoever prepares the T5013 and the partners’ T1 returns | Whoever prepares the T2 and holds the corporate records |
Prices verified on 7 September 2026. Competitor pricing changes; the reviewer re-checks this table quarterly.
Three conditions that decide whether the protection actually holds
- A limited partner keeps limited liability only while that partner stays out of the control of the business. Take part in managing it and the protection the Limited Partnerships Act, R.S.O. 1990, c. L.16 gives can be lost.
- A corporation’s debts are its own except where you have signed a personal guarantee, and except for the liabilities the OBCA and the CBCA place on directors, including unremitted source deductions and unpaid wages. A landlord or a bank asking for a guarantee is asking you to step back outside the corporation.
- An Ontario LLP is open only to professions whose governing Act permits practice through an LLP. Most businesses cannot register one, and an LLP shields a partner from another partner’s negligence but not from the ordinary debts of the firm.
Where each option wins
A partnership starts for $60.00 and asks for little afterwards. No minute book, no securities register, no transparency register, no T2 and no dissolution filing.
Early losses are worth more in a partnership. An allocated loss reduces that partner’s other income now, where a corporate loss waits for future corporate profit.
A corporation contains the business’s debts. It is a separate legal person under the OBCA and the CBCA. In a general partnership one partner’s error reaches every other partner’s assets.
A corporation lets you choose when you are taxed. A Canadian-controlled private corporation pays a federal net rate of 9 percent on active business income up to the $500,000 business limit, so retained profit meets personal rates only when drawn.
A corporation survives a change of owner. Shares are transferred and the company carries on. A general partnership may dissolve when a partner leaves. If there is only one owner, the comparison you want is corporation vs sole proprietorship in Ontario instead.
What the choice is worth, in dollars
The rates above decide nothing on their own. What decides it is how much of the profit stays in the business, and whether the first year makes money at all. Two worked examples, both Ontario, both built only from figures already in the tables above.
Example 1: two partners reinvesting $120,000 a year
A two-owner business earns $260,000 of active business income. Each owner needs $70,000 to live on, so $140,000 comes out and $120,000 stays in to fund the next hire and the next vehicle.
As a partnership, section 96 of the Income Tax Act computes the income and allocates $130,000 to each partner, who pays personal rates on all of it, drawn or not. The $120,000 they left in the business has already been taxed at personal rates. Taken at Ontario’s top combined marginal rate of 53.53 percent, which is the upper bound and the right one to use where the partners have other income, that slice costs $64,236 in tax and leaves $55,764 to reinvest.
As a corporation, the $120,000 is retained inside the company and taxed once at roughly 12.2 percent, being the federal net rate of 9 percent plus Ontario’s 3.2 percent on active business income within the $500,000 business limit. That is $14,640 of tax, leaving $105,360 inside the company to spend.
This is a deferral, not a permanent saving. The rest of the tax falls due when the money is finally paid out to a shareholder, and the integrated total lands close to the personal rate. What incorporating buys is the use of the money in the meantime.
Working capital available in year one: $105,360 incorporated against $55,764 as partners. A difference of $49,596.
Example 2: a $40,000 first-year loss, both owners still on salaries
Two owners keep their jobs and start the venture alongside them. Year one loses $40,000, split equally between them.
As a partnership, each partner’s allocated $20,000 loss comes off their employment income in the year the money was spent. Where each owner’s salary already puts them at Ontario’s top combined marginal rate of 53.53 percent, that is $10,706 back to each of them, $21,412 between them, this year.
As a corporation, the $40,000 is a non-capital loss trapped inside the company. It carries forward against the corporation’s own future income, where it is worth about 12.2 percent, or $4,880 — and only once the corporation earns a profit to use it against, which may be years away and may never come.
$21,412 refunded this year as partners, against $4,880 of value that is both deferred and conditional inside a corporation.
Both examples assume Ontario residency, active business income within the $500,000 business limit, and no other planning layered on top. A marginal rate depends on each owner’s total income for the year, and 53.53 percent is Ontario’s top combined rate, used here as the upper bound rather than as your rate. Your own figures will differ, which is what the consultation is for.
Where we win
The professional fee row says $35.00, HST included. Not $35 plus tax, and not $35 with a package attached. That is the whole fee for filing your articles.
The government fee rows are at cost. The $300.00 Ontario fee and the $200.00 federal fee reach the registry exactly as you paid them, so the gap between the columns is our fee alone.
Rows we have not priced say so. The minute book, T5013 and T2 rows read quoted on request, rather than a figure we have not stood behind.
A CPA licence stands behind the decision, not just the filing. Gondaliya CPA Professional Corporation holds CPA Ontario firm registration number 61330051, and the firm that settles the share structure files the return below it.
Who should choose which
| Situation | Best choice | Why |
|---|---|---|
| Two friends testing an idea with no staff, no lease and no inventory | Partnership | $60.00 registers the name for five years, each share of profit goes on a T1, and there is no T2 or minute book to pay for |
| The venture is expected to lose money for its first two years, and both owners have salaried jobs | Partnership | Each partner’s allocated loss reduces employment income now, where a corporate loss waits for future corporate profit |
| A short project between two existing businesses with a defined end date | Partnership | The structure ends when the project does, without a dissolution filing or a final T2 |
| Investors want to put money in without running the business or taking on its debts | Limited partnership, or a corporation | The Limited Partnerships Act limits a limited partner’s liability, but only while that partner stays out of control of the business. Shares do the same job without that condition |
| Trades, food service, construction, or anything with employees, a lease or physical risk | Corporation | The corporation is a separate legal person under the OBCA or the CBCA, so its debts are its own, subject to any guarantee you sign. See the Ontario incorporation guide |
| The business will earn more than the owners take out to live on | Corporation | The federal net rate of 9 percent applies to active business income up to the $500,000 business limit, so retained profit is taxed once at a low rate and again only when paid out |
| Three owners splitting ownership unevenly, with one expected to leave in a few years | Corporation | Share classes record who owns what and a departure is a share transfer, not a dissolution. Ask a lawyer about the shareholder agreement; we do not draft one |
| A regulated professional whose college permits incorporation | Corporation, as a professional corporation | The college issues the certificate that lets the corporation practise, and the articles must match its conditions. Some colleges permit an LLP instead, and some permit only one of the two |
| An existing partnership with equipment, goodwill and a client list | Corporation, with a rollover | Section 85 of the Income Tax Act allows the assets to move into the corporation at an elected amount rather than at fair market value |
Not sure which column you are in?
Tell us what the business does, who owns it and what you expect to leave in it. We will tell you which structure fits before you pay anything, and if the answer is a partnership we will say so.
What a CPA checks before you incorporate
The decision here is really about where profit lands and who is liable for it, so we start with allocation. A partnership computes income once and pushes each partner’s share onto their personal return whether or not the cash was drawn. A corporation keeps what it does not pay out and taxes it at the small business rate on active income up to the $500,000 limit. Partners who reinvest are the ones who feel the difference first.
Liability is the second point. Partners in a general partnership are jointly liable for the firm’s obligations, including those created by a partner acting alone. Shareholders are not, provided the corporation is respected as a separate entity from day one.
Then the structure a corporation gives you and a partnership does not. Separate share classes let two founders hold unequal growth, a preferred class lets a departing partner be bought out at a frozen value, and a non-voting class lets a spouse hold equity without control. A partnership agreement can imitate some of that, and it is a legal document we do not draft.
Family income is tested under section 120.4 of the Income Tax Act either way, and hours actually worked in the business is the test that usually decides it.
The remaining items are the same on both sides of the comparison and are handled differently. A fiscal year end, which a partnership of individuals cannot freely choose and a corporation can. HST at the $30,000 threshold. Salary against dividends. Whether a holding company belongs above. And a section 85 election where an existing business is moving in.
Frequently asked questions
Is a partnership or a corporation better for two owners?
Neither is better in the abstract, and the deciding factor is liability, because every partner in an Ontario general partnership is personally liable for the debts of the firm under the Partnerships Act, R.S.O. 1990, c. P.5, while a corporation under the OBCA or the CBCA is a separate legal person. A partnership costs $60.00 to register against $300.00 in Ontario or $200.00 federally, so price is not what decides it. Two owners with no staff, no lease and no inventory can reasonably start as a partnership.
Which costs more to set up in Ontario, a partnership or a corporation?
A corporation costs more to set up: $335.00 in total, being $300.00 to the Ontario Business Registry for Articles of Incorporation plus our $35.00 fee with HST included, against $60.00 for a general partnership or LLP firm name and $210.00 for a limited partnership. The partnership figures buy a five-year term, so the renewal falls due again in year six, while an Ontario corporation pays $0.00 for its Annual Return under the Corporations Information Act. No HST is added to any of these registry fees. Over ten years the corporation is the cheaper filing, and the liability difference is free.
Does a partnership pay tax?
A partnership does not pay income tax itself, because section 96 of the Income Tax Act computes the income at the partnership level and allocates it to the partners, who each report their share on a personal T1 and pay personal rates on it, drawn or not. A corporation is taxed in its own right first, at a federal net rate of 9 percent where a Canadian-controlled private corporation claims the small business deduction on active business income up to the $500,000 business limit.
Does a partnership have to file a return with the Canada Revenue Agency?
A partnership files a T5013 Partnership Information Return only where it meets the Canada Revenue Agency’s filing tests, and we confirm the dollar thresholds behind those tests against the Canada Revenue Agency’s current guidance before the return is filed. The T5013 is an information return, not a tax return, and each partner still reports their allocated share on a personal T1. A corporation files a T2 every year, even with no activity.
Does an LLP give the same protection as a corporation?
No, because a limited liability partnership under the Ontario Partnerships Act shields a partner from liability arising out of another partner’s negligence but leaves that partner exposed to the ordinary debts of the firm, which a corporation under the OBCA or the CBCA does not. An Ontario LLP is also open only to professions whose governing Act permits practice through an LLP, so most businesses cannot use one.
Can we convert our partnership into a corporation later?
Yes, and section 85 of the Income Tax Act allows the equipment, goodwill and other partnership assets to transfer into the corporation at an elected amount rather than at fair market value, which avoids an immediate tax bill on the accrued gain. The election is filed with the Canada Revenue Agency, and the contracts, bank account, HST number and payroll account move across at the same time.
Why clients trust us with this decision
Gondaliya CPA Professional Corporation is registered with CPA Ontario under firm registration number 61330051. Our clients have left us 1,300+ five-star Google reviews, and we work from 13 Ontario offices, open 9:00 AM to 8:30 PM, Monday to Sunday. We back every filing with a 30-day money-back guarantee and a 60-day fee-matching policy, and we are a Xero Partner Award Winner 2026. Open Corporation for $35 is a department of Gondaliya CPA.
No legal advice
Gondaliya CPA Professional Corporation is a firm of Chartered Professional Accountants licensed by CPA Ontario, firm registration number 61330051. It is not a law firm. We prepare and file corporate documents and we provide accounting and tax advice. Nothing on this page is legal advice, and reading it creates no solicitor and client relationship. For legal advice, including advice on a shareholder agreement before you sign it, consult a lawyer licensed in the province where your corporation carries on business.
Ready to decide
If a partnership is the right answer, register the name for $60.00 and keep your money. If a corporation is, we file the articles for $35.00, HST included, with the government fee shown separately at cost.
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