Should You Incorporate?
Short answer: If you're raising money, have co-founders, or expect liability risks—yes. If you're a solo freelancer making under $50k—probably not yet.
Corporation vs Partnership vs Sole Proprietorship
| Structure | Liability | Tax Rate | Best For |
|---|---|---|---|
| Corporation | Limited | 11.5% (first $500K) | Scaling startups, multiple owners |
| Partnership | Personal | Personal tax rate | Professional services, simple splits |
| Sole Proprietorship | Personal | Personal tax rate | Solo freelancers, testing ideas |
✅ Incorporate When You:
- • Plan to raise investment capital
- • Have business partners/co-founders
- • Face potential liability (product, professional)
- • Want to retain earnings at lower tax rate
- • Need credibility with enterprise clients
❌ Don't Rush If You're:
- • Solo with under $50K revenue
- • Still validating your business idea
- • Planning to draw all profits as salary anyway
- • Not ready for corporate record-keeping
Federal vs Provincial Incorporation
This is the first big choice. Both are valid corporations with limited liability. The difference is scope and cost.
Federal Corporation (CBCA)
Cost: ~$200 online / ~$500 lawyer
Timeline: 1-5 business days
Name Protection: Canada-wide
Business Scope: Anywhere in Canada
Regulator: Corporations Canada
Best For:
- • Multi-province operations
- • Venture capital funding
- • Strong brand name protection
- • Future expansion plans
Ontario Corporation (OBCA)
Cost: ~$155 online / ~$400 lawyer
Timeline: Same day online
Name Protection: Ontario only
Business Scope: Anywhere in Canada
Regulator: ServiceOntario
Best For:
- • Ontario-focused business
- • Cost-sensitive startups
- • Faster incorporation
- • Simpler reporting
💡 Practical Advice
Default to federal if you're raising VC money or planning to expand. Ontario investors expect federal corps.Choose provincial if you're bootstrapping a local business and want to save $50.
Step-by-Step Incorporation Process
Step 1: Name Search & Reservation
You need a NUANS (Newly Upgraded Automated Name Search) report to reserve your corporate name.
Pro tip: Have 2-3 backup names ready. Your first choice is probably taken.
Step 2: Prepare Articles of Incorporation
This is your corporation's "birth certificate." Key decisions:
- Share structure: Authorized share classes and maximum number
- Restrictions: Usually "private company" restrictions on share transfers
- Directors: Minimum 1 for federal, 3 for Ontario (25% must be Canadian resident)
- Business purpose: Keep it broad unless you have specific reasons
Step 3: File Articles & Pay Fees
Filing fee: $200
Timeline: 1-5 days
Online: corporations.canada.ca
Filing fee: $155
Timeline: Same day
Online: ontario.ca/services
Both jurisdictions offer online filing. Federal takes longer but provides Canada-wide name protection.
Step 4: Corporate Records Setup
Once incorporated, you need to create your corporate "minute book"—the permanent record of corporate decisions.
- Corporate bylaws (rules for running the company)
- Directors' resolutions (appointing officers, bank signing authority)
- Share certificates and register
- Shareholders' agreement (if multiple founders)
⚠️ Don't Skip the Corporate Records
Many online incorporation services stop after filing articles. But without proper bylaws and resolutions, your corporation isn't legally functional. Banks won't open accounts. Investors won't write checks.
After Incorporation: What Happens Next?
Immediate (Week 1)
- Open corporate bank account
- Apply for business number (BN) with CRA
- Register for HST/GST if revenue will exceed $30k
- Set up corporate credit card
- Update contracts and invoices with corporate name
Month 1
- Business insurance (general liability, errors & omissions)
- Accounting software setup (QuickBooks, Xero, FreshBooks)
- Payroll setup if paying salaries
- WSIB registration if you have employees
Ongoing (Annual)
- Annual returns (due date varies by jurisdiction)
- Corporate tax returns (T2) - due 6 months after year-end
- Annual directors' resolutions and shareholder meetings
- Updated minute book records
Common Mistakes That Cost Money Later
❌ Incorporating Too Early
If you're solo and making under $50k, you're probably paying more in corporate compliance costs than you're saving in taxes. Wait until it makes financial sense.
❌ Bad Share Structure
Equal 50/50 splits with no vesting. No option pool. Single share class. These create problems when you need investment or when founders leave. Fix it early or pay lawyers later.
❌ Ignoring Corporate Records
"It's just me and my co-founder, we don't need formal resolutions." Wrong. Banks need signing authority resolutions. Investors need proper share certificates. Do it right from day 1.
❌ No Shareholders' Agreement
What happens if a founder wants out? Gets divorced? Dies? A shareholders' agreement answers these questions before they become legal battles.
Need Help Getting It Right?
Incorporation is the foundation of your startup. Don't wing it with online forms and hope for the best.
Legal Disclaimer
This guide provides general information about Ontario business incorporation and is not legal advice. Corporate law is complex and your situation is unique. For specific legal guidance about your startup's structure, consult with a qualified business lawyer. Nothing in this guide creates a lawyer-client relationship.