Why Incorporating in Ontario Might Be the Smartest Move for Your Business!
- Natalie Paquette
- Jun 1
- 3 min read
If you're running a business in Ontario — or even thinking about starting one — you've probably heard people toss around the idea of incorporation. But what exactly does it mean, and more importantly, is it worth it?
Incorporating your business in Ontario can unlock a range of benefits that go beyond just a fancy title. Whether you're a freelancer, a startup founder, or a small business owner ready to grow, here's why incorporating might be the smartest move you make this year.
1. Limited Liability Protection
One of the biggest perks of incorporation is limited liability. Once your business is incorporated, it's treated as a separate legal entity — which means your personal assets are generally protected from business debts and lawsuits. If things go south, your house, car, and savings are far less likely to be at risk.
For businesses whose activities are more risky (like a home renovation or tree removal company) or if you're concerned at all about liability, it's probably a good idea to have a quick appointment with a lawyer to talk about this.
2. Tax Advantages
Incorporated businesses in Ontario can access lower corporate tax rates compared to personal income tax rates. Small businesses that qualify for the Small Business Deduction (SBD) can benefit from a significantly reduced corporate tax rate on the first $500,000 of active business income.
On top of that, corporations can:
Defer personal taxes by keeping income within the company.
Pay dividends instead of salaries to reduce tax burdens.
Deduct certain business expenses more easily.
3. Increased Credibility and Professionalism
Being a corporation adds a certain level of professionalism and credibility that sole proprietorships or partnerships don't always offer. Clients, suppliers, and investors often feel more comfortable working with incorporated businesses — especially when contracts, financing, or large deals are involved.
4. Easier Access to Funding
Incorporated businesses can raise money by selling shares. That's not an option for sole proprietorships. Whether you're seeking venture capital, angel investment, or even government grants, being incorporated opens up more funding opportunities.
5. Continuity and Transferability
Unlike sole proprietorships, corporations don't end when the owner retires, passes away, or decides to sell the business and move on to the next venture. Ownership can be transferred through selling shares, making succession planning or selling the business much easier down the road.
6. Name Protection
When you incorporate in Ontario, your business name is protected within the province — meaning no other corporation can register the same or a confusingly similar name. This can be especially helpful if you're building a recognizable brand.
7. Flexible Income Splitting and Tax Planning
Corporations offer more flexibility in how you pay yourself and your partners. You can:
Split income with family members through dividends (where permitted by law).
Time your income and expenses more strategically.
Retain earnings in the company to reinvest in growth.
This kind of flexibility can make a big difference as your business scales.
Final Thoughts
Incorporation isn't a magic solution, and it's not right for everyone. It comes with added responsibilities like filing corporate tax returns, maintaining corporate records, and paying incorporation and annual fees. But, for many entrepreneurs in Ontario, the long-term benefits far outweigh the costs.
If you're serious about growth, protecting your personal assets, and optimizing your tax strategy, incorporating in Ontario could be one of the best decisions you make for your business.
Need Help Getting Started?
We're here, ready to help when you're ready to get started. While we can't tell you that a corporation is the route you should take, we can definitely help you register your corporation and answer your questions along the way.
