1. You earn more than you need to live on
The main tax reason to incorporate is deferral. Income left in the corporation is taxed at the small business rate, which is far lower than the top personal rate, and personal tax is paid only when you take the money out. If you are drawing everything anyway, there is little to defer.
2. You want limited liability
A sole proprietor's personal assets are exposed to the business's debts and disputes. A corporation is a separate legal person and can keep business risk away from your home and savings. This matters more once you hire, sign a lease or take on larger contracts. For regulated professionals the protection has limits.
3. You want to look established
Some customers and lenders prefer to deal with a corporation. Incorporation helps with financing applications, vendor accounts and larger contracts, and signals that the business is built to last.
4. You want to share income with family
With the right structure, a spouse or family member can be paid a reasonable salary or receive dividends. The tax on split income (TOSI) rules restrict this heavily, so it must be planned rather than assumed.
5. You are investing for the long term
A corporation can retain earnings, buy equipment or property and hold investments, and it is the structure most buyers and successors expect to see when the business changes hands.
Not sure it is time?
Incorporation is not right for everyone and timing matters. We work through your income, industry and goals, and if it makes sense we handle the setup with the CRA and the provincial registry. Read how incorporating saves tax, and when it does not, or ask us under advisory.