Should I incorporate my business? 7 questions to ask first

"Should I incorporate?" is one of the most common questions we hear from business owners. The honest answer is: it depends. Incorporating can bring real benefits, but it also adds cost, paperwork and rules. Here are seven questions to work through first.

1. How much profit will the business make?

A Canadian-controlled private corporation pays a much lower small business tax rate on active business income than most individuals pay at higher income levels. The saving comes when you can leave profits in the corporation instead of taking everything out personally. If you need all the profit to live on, the tax benefit is much smaller.

2. Do you need to take all the money out?

Money paid to you as salary or dividends is taxed personally. Incorporation works best when part of the profit can stay in the business for growth, equipment or savings.

3. How much risk does the business carry?

A corporation is a separate legal person, so in many cases business debts and claims stay with the corporation. Personal guarantees (which banks and landlords often ask for) and professional liability are exceptions.

4. Will you have partners or investors?

Shares make it easier to bring in partners, set out who owns what and eventually sell the business.

5. Are you ready for the extra work?

A corporation files its own tax return, keeps a minute book and registers, files annual returns and usually runs payroll or dividends for the owners. Budget for accounting fees accordingly.

6. Are you a professional?

Doctors, dentists, lawyers, accountants and some other professionals can incorporate only as a professional corporation, with rules set by their regulator.

7. What are your long-term plans?

Selling one day, bringing family members in, or setting up a holding company all affect the best structure.

The bottom line

Tax rates and rules change (Ontario adjusted its small business rate in 2026, for example), so run the numbers for your own situation before deciding. Book a free consultation and we will compare staying a sole proprietor with incorporating, using your figures.