Free tool

Should you incorporate?

Six questions. One straight answer. Then we'll show you the numbers.

1. What will your business profit be this year (before paying yourself)?
2. How much of that profit do you need to live on?
3. How much liability risk comes with your work?
4. Are you planning to hire or reinvest in growth?
5. Could you sell the business someday?
6. How do you feel about extra admin — separate books, a corporate return, annual filings?

When incorporating usually makes sense

The big advantage is tax deferral: active business income in a Canadian-controlled private corporation is taxed at the small-business rate on the first $500,000 of income — about 11–12% combined in Ontario — instead of your personal rate. That only helps if you can leave money in the company.

If you need every dollar to live on, the savings shrink, and the costs — accounting, a separate T2 return, annual filings — can outweigh them. Other factors matter too: liability, a future sale (and the lifetime capital gains exemption), and how you plan to fund retirement.

There's no magic number. The deciding factor is usually how much profit you can leave in the corporation each year, not total revenue.

It can limit some business liabilities, but not all — personal guarantees and professional liability can still reach you. Talk to a lawyer about your situation.

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