Sole proprietorship vs corporation: which one suits your business
Tell us your expected profit, your drawings and whether anyone else will own part of the business. A CPA answers before anything is filed. Open Corporation for $35 is a department of Gondaliya CPA. Questions first? Call 647-212-9559, 9:00 AM to 8:30 PM, Monday to Sunday.
A sole proprietorship and a corporation are two legal answers to one question: who owns this business, and whose assets are exposed when it goes wrong. A sole proprietorship is you, taxed on your personal T1, with your house standing behind the debt. A corporation is a separate legal person under the Business Corporations Act (Ontario) or the Canada Business Corporations Act, and it files its own T2. Open Corporation for $35 is a department of Gondaliya CPA. Where the answer is a corporation, our drafting and filing charge is $35.00 with HST inside it, and the government fee stays apart at cost: $300.00 to the Ontario Business Registry, or $200.00 to Corporations Canada.
The short answer
A sole proprietorship suits a low-risk business with one owner that spends most of what it earns. It costs $60.00 to register a business name with the Ontario Business Registry, and the profit goes on your personal T1 return.
A corporation suits a business that carries real liability, has more than one owner, or earns more than the owner needs to live on. 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 a sole proprietor pays personal rates on every dollar. See what incorporation costs in Ontario for the full fee breakdown.
The usual trigger is the first year you leave money in the business. Liability is the second trigger, and it does not wait for a profit figure. Neither structure fixes a bad contract or replaces insurance.
Price, line by line
| Item | Sole proprietorship (Ontario) | Corporation (Ontario) | Difference |
|---|---|---|---|
| Government registration fee | $60.00 business name registration, five-year term, Ontario Business Registry. No HST on registry fees | $300.00 Articles of Incorporation filed online, Ontario Business Registry. No HST on registry fees | $240.00 more to incorporate |
| Federal alternative, government fee | Not available. A sole proprietorship is registered provincially | $200.00 to Corporations Canada for a standard online filing. No HST on registry fees | Federal is $100.00 less than Ontario at the registry |
| Our professional fee | Confirmed to you in writing before anything is filed | $35.00, HST included. That is the whole professional fee | Both shown separately from the government fee |
| Name search | Not required to register a business name | $0.00 for a numbered corporation. $25.00 NUANS report, HST included, for a named one | Only a named corporation needs a NUANS report |
| Total to start | $60.00 plus our confirmed service fee | $335.00 for a numbered corporation, being $300.00 plus $35.00 including HST | $275.00 before our sole proprietorship fee |
| Recurring government fee | $60.00 every five years to renew the business name | $0.00 for the Ontario Annual Return. $12.00 if the corporation is federal | Ontario charges a corporation nothing yearly |
| 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 |
| Minute book | Not required | Required by the Act. Our fee is quoted on request | A cost the sole proprietor does not carry |
| Annual tax return | Form T2125 filed with your personal T1. Quoted on request | A separate T2 corporate return every year, from $300 | Two returns to prepare instead of one |
| Ongoing subscription | $0.00. None | $0.00. None | $0.00 |
Government fees read from the Ontario Business Registry and Corporations Canada fee pages, and tax figures from canada.ca, last checked on 16 October 2026. Fees change, and we re-check this table every quarter. The same government figures, at cost, are on our pricing page.
Feature by feature
| Feature | Sole proprietorship | Corporation |
|---|---|---|
| Legal status | The same legal person as you | A separate legal person from its shareholders |
| Governing statute | Business Names Act (Ontario) | Business Corporations Act (Ontario), or the Canada Business Corporations Act federally |
| Registry | Ontario Business Registry | Ontario Business Registry, or Corporations Canada |
| Liability for business debts | Yours personally, without limit | The corporation’s, subject to guarantees you sign and to director liabilities |
| Government fee to start | $60.00 | $300.00 Ontario, or $200.00 federal |
| Name protection | The registration does not give exclusive rights to the name | Ontario protects the corporate name provincially. A federal name is protected across Canada |
| Renewal of the name | Every five years, $60.00 | None. The name lasts while the corporation exists |
| Number of owners | One | One or many, through share classes |
| Bringing in a co-owner or investor | Not possible without changing structure | Shares are issued or transferred |
| How profit is taxed | At your personal rates, on Form T2125 with your T1 | Inside the corporation first, then again when it is paid out to you |
| Rate on the first $500,000 of active business income | Personal rates apply to every dollar | Federal net rate of 9 percent for a CCPC claiming the small business deduction |
| Leaving profit in the business | No. Profit is taxed to you whether you take it or not | Yes. Tax on the retained part is deferred until it is paid out |
| Early-year losses | Deductible against your other personal income in the year | Kept in the corporation and carried forward against its own future income |
| Paying yourself | Drawings. No payroll, no T4 | Salary, dividends, or both, decided each year |
| HST registration | Required once taxable sales pass $30,000 | The same $30,000 test, measured on the corporation |
| Year end | 31 December, fixed | Any date the directors choose, with the first within 53 weeks of incorporation |
| Annual government filing | Business name renewal every five years | 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 2019 |
| Selling the business | You sell assets. No share sale is possible | Shares may qualify for the lifetime capital gains exemption |
| Winding it down | Cancel the registration, at no government fee | A formal dissolution filing and a final T2 |
| Who to call in a CRA audit | Whoever prepares your T1 | Whoever prepares the T2 and holds the corporate records |
Government fees read from the Ontario Business Registry and Corporations Canada fee pages, and tax figures from canada.ca, last checked on 16 October 2026. Fees change, and we re-check this table every quarter.
Where each option wins
A sole proprietorship starts for $60.00 and stops for nothing. There is no minute book, no securities register, no transparency register, no T2 and no dissolution filing, and if it does not work out the registration simply lapses.
Early losses are worth more in a sole proprietorship. A loss on Form T2125 comes off your employment income in the same year, where the same loss inside a corporation waits for future corporate profit.
A corporation separates the business’s debts from your own. That is why trades, food businesses and anything with staff or premises incorporate before the first contract.
A corporation lets you choose when you are taxed. Retained profit is taxed at the low small business rate now, and at your personal rate only when you draw it. It can also have more than one owner and be sold as shares.
Where we win
The professional fee row says $35.00, HST included. Not $35 plus tax, and not $35 with a mandatory package attached. That is the whole professional fee for preparing and 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 and nothing else.
Fees we quote are confirmed before you pay. If a sole proprietorship is the right answer, our sole proprietorship registration fee is confirmed to you in writing before anything is filed.
A CPA licence stands behind the advice, not just the filing. Gondaliya CPA Professional Corporation holds CPA Ontario firm registration number 61330051, and the firm that settles your share structure files the T2.
Who should choose which
| Situation | Best choice | Why |
|---|---|---|
| A side business earning $12,000 a year alongside a full-time job | Sole proprietorship | $60.00 to register, the income goes on your T1, and there is no T2 or minute book to pay for |
| You expect losses in the first two years | Sole proprietorship | The loss on Form T2125 reduces your employment income now, where a corporate loss waits for future corporate profit |
| Freelance work with no staff, no premises and no inventory | Sole proprietorship | The liability a corporation is built to contain is not present, and the corporate filings are a cost with no return |
| Profit is more than you draw out to live on | Corporation | The federal net rate of 9 percent applies to active business income up to the $500,000 limit. Our Ontario incorporation guide sets out the steps |
| Contracting, trades, food service, or anything with employees or a lease | Corporation | The corporation is a separate legal person, so the business’s debts are its own, subject to any guarantee you sign |
| Two or more owners splitting ownership unevenly | Corporation | Share classes record who owns what. 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. See our professional corporation guide |
| Already a sole proprietor with equipment, goodwill and a client list | Corporation, with a rollover | A section 85 rollover moves the assets in at an elected amount rather than at fair market value |
What a CPA checks before you incorporate
This decision comes down to a number and a date, and most people only look at the number.
The number is the gap between your personal marginal rate and the small business rate on active income up to the $500,000 limit. A proprietor pays personal rates on every dollar of profit whether it is drawn or left in the business. A corporation lets the undrawn part sit at the lower rate until it is taken out. If you are spending everything you earn, that gap is small. If you are reinvesting, it compounds.
The date is your fiscal period. A proprietorship reports on the calendar year. A corporation picks any first year end within 53 weeks of incorporation, which lets a first set of accounts run short or long depending on when the revenue actually starts.
Then the things a corporation makes possible that a proprietorship cannot. Shares for a spouse or adult child, subject to section 120.4 of the Income Tax Act. A preferred class so value can be frozen when a partner buys in. A holding company above the operating company once retained profits are worth protecting. Salary, dividends, or a mix, rather than one drawing account. Our share structure guide explains the classes.
And the mechanics of getting there. The HST account moves from you to the corporation, so the timing of that change matters against the $30,000 threshold, as our HST registration guide explains. Goodwill, equipment and inventory move under a section 85 election, or the gain is taxable.
Case studies
A designer with a side business
The situation: A graphic designer with a full-time job expected about $12,000 a year from freelance work and asked whether to incorporate.
What we did: We advised a sole proprietorship, registered the business name for $60.00, and set out the HST threshold in writing.
The result:
- Registered for the $60.00 government fee
- No T2 or minute book to pay for
- HST threshold tracked from day one
A contractor with staff and a lease
The situation: A renovation contractor was about to sign a commercial lease and hire two employees as a sole proprietor.
What we did: We explained the personal liability on the lease and the staff, and incorporated in Ontario instead.
The result:
- Corporation filed for $335.00 in total
- Payroll account opened in the corporation’s name
- Year end chosen to match the busy season
A consultant leaving profit behind
The situation: A consultant had been a sole proprietor for three years and was drawing about half of the profit.
What we did: We incorporated the business and prepared the section 85 election so the client list moved in without a taxable gain.
The result:
- Retained profit taxed at the small business rate
- Goodwill moved in with no gain reported
- First T2 prepared by the same firm
Frequently asked questions
At what profit should I incorporate?
There is no fixed threshold, but the tax argument starts working once the business earns more than you take out, 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 a sole proprietor pays personal rates on every dollar. If you draw everything out each year, the deferral has nothing to defer. Liability can justify incorporating at any profit.
How much does it cost to register a sole proprietorship in Ontario?
Registering a business name for a sole proprietorship costs $60.00 through the Ontario Business Registry, and the registration lasts five years. No HST is added to that registry fee, and renewal is another $60.00 at the end of the term. If you trade under your own legal name with nothing added to it, a registration may not be required.
How much more does it cost to incorporate than to stay a sole proprietor?
Incorporating in Ontario costs $240.00 more in government fees: $300.00 for Articles of Incorporation against $60.00 for a five-year business name registration. Our fee of $35.00 with HST included brings a numbered Ontario corporation to $335.00 in total. A federal incorporation narrows the gap, because Corporations Canada charges $200.00.
Does incorporating protect me personally?
A corporation is a separate legal person, so its debts are its own rather than yours, but that protection has limits. Banks and landlords often ask a new corporation’s owner for a personal guarantee, and directors can be personally liable for unremitted payroll deductions and HST.
Do I have to register for HST if I incorporate?
Registration is required once taxable sales pass $30,000, the small supplier threshold, and the test applies the same way to a sole proprietor and to a corporation. Incorporating creates a new legal person, so the corporation starts its own count. Registering voluntarily before the threshold can be worth it for the input tax credits.
Does starting as a sole proprietor close the door on incorporating later?
No. Section 85 of the Income Tax Act lets you move the equipment, goodwill and other assets of an unincorporated business into a corporation at an elected amount instead of at fair market value, so the switch does not trigger an immediate tax bill on the gain. The election is filed with the Canada Revenue Agency on Form T2057. Getting the elected amounts wrong is expensive, so the transfer is CPA work.
Book a free consultation call
Not sure which structure fits? Tell us your expected profit on a free call, and a CPA will tell you plainly, even if the answer is the $60.00 registration.
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.
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Ready to decide
If a sole proprietorship 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 $300.00 Ontario fee or the $200.00 federal fee shown separately at cost. Open Corporation for $35 is a department of Gondaliya CPA.
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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.
Open Corporation for $35 is a department of Gondaliya CPA.
