Incorporating your business is a major milestone — and while it comes with extra responsibilities, it can also unlock powerful tax and legal advantages. But how do you know when the time is right?
Here are five key indicators that you might be ready to incorporate:
1. You’re Earning More Than You Need Personally
One of the biggest reasons to incorporate is tax deferral. If your business is earning more than you personally need to spend, incorporating allows you to:
- Leave excess income in the corporation
- Pay a lower corporate tax rate (vs. personal)
- Defer personal taxes until you withdraw the funds later
This is a common strategy for professionals and growing service-based businesses.
2. You Want Legal Protection and Limited Liability
As a sole proprietor, your personal assets are exposed to business risks — including debts, lawsuits, or disputes. Incorporating creates a separate legal entity, which helps:
- Limit your personal liability
- Protect your personal savings, home, and other assets
- Provide more peace of mind as your business takes on more risk
This is particularly important if you hire employees, sign leases, or enter into larger contracts.
3. You’re Looking More “Legit” to Clients, Lenders, or Investors
Being incorporated can add credibility. In many industries, clients expect to work with incorporated businesses. It also:
- Helps when applying for financing
- Creates a more professional image
- Can help with vendor relationships and contract negotiations
For startups and service firms alike, it signals maturity and stability.
4. You Want to Split Income With a Spouse or Family Member
While there are complex rules around income splitting (especially due to the TOSI legislation), incorporating can allow for some flexibility in:
- Paying a spouse a reasonable salary
- Allocating dividends to other shareholders (with proper planning)
This can help reduce the overall household tax burden — if done carefully and in compliance with CRA rules.
5. You’re Investing in the Business and Need Long-Term Planning
Corporations can be a powerful vehicle for:
- Retaining earnings
- Investing in assets (equipment, real estate, etc.)
- Building a structure for future succession or sale
If you’re starting to think long-term, incorporating is often the next logical step.
Not Sure If It’s Time?
Incorporation isn’t right for everyone — and timing matters. We help clients assess whether the move makes sense based on your income, industry, and goals.
Thinking About Incorporating?
We’ll help you make the decision — and handle the full setup with the CRA and provincial registry.