Toronto Incorporation & Business Setup Services

Incorporation creates a separate legal entity (corporation) distinct from its owners, providing limited liability protection for personal assets. A sole proprietorship offers no legal separation between the business and owner. Corporations can access small business tax rates (currently 11.5% in Ontario for eligible income), while sole proprietors pay personal tax rates. Incorporation also enables income splitting opportunities, easier transfer of ownership, and enhanced credibility with suppliers and customers, but requires more formal record-keeping and compliance.

Consider incorporation when your business income exceeds $50,000 annually, you want liability protection for personal assets, plan to retain earnings in the business, have business partners, or seek to enhance professional credibility. Incorporation is also beneficial if you're in a high-risk industry, want to access corporate tax rates, or plan to sell the business in the future. However, incorporation isn't always necessary for small, low-risk businesses with minimal income, as the additional compliance costs may outweigh the benefits.

Ontario corporations benefit from the small business tax rate of 11.5% on the first $500,000 of active business income (combined federal and provincial). This compares favorably to personal tax rates that can exceed 50% for high earners. Corporations can also defer personal tax by retaining earnings, access the lifetime capital gains exemption when selling qualified small business shares, implement income splitting strategies with family members, and deduct a wider range of business expenses. However, these benefits must be weighed against additional compliance costs and potential double taxation.

Ontario corporation incorporation can be completed online in as little as 1-2 business days for standard applications, though federal incorporation may take 1-2 weeks. However, the complete business setup process including obtaining a business number, registering for GST/HST, opening corporate bank accounts, and establishing proper corporate governance typically takes 2-4 weeks. Factors that may extend this timeline include name searches, customized share structures, multiple business activities, or specific regulatory requirements for your industry.

Incorporated businesses must file annual corporate tax returns (even with no income), maintain corporate records and minute books, file annual returns with the provincial government, hold annual shareholder meetings, and comply with GST/HST filing requirements if applicable. Directors must also ensure proper corporate governance, maintain separate business and personal finances, and keep detailed financial records. Failure to meet these requirements can result in penalties, loss of corporate status, or personal liability for directors. Professional ongoing support helps ensure all compliance requirements are met.

Ontario incorporation is typically sufficient for businesses operating primarily within the province and is generally less expensive. Federal incorporation provides automatic name protection across Canada and easier expansion to other provinces, making it ideal for businesses planning national operations. Both offer similar liability protection and tax benefits. The choice depends on your business plans, budget, and growth strategy. If you're unsure, Ontario incorporation can often be converted to federal later, though federal-to-provincial conversion is not possible. Our experts help you choose the right jurisdiction based on your specific circumstances.