Sole Proprietorship vs Corporation in Ontario: Which Is Better?

Comparing Ontario Business Structures

Choosing between a Sole Proprietorship and an Ontario Corporation is one of the most consequential decisions an entrepreneur faces.

Each structure presents distinct legal, operational, and tax trade-offs.

Head-to-Head Comparison Table

Factor	Sole Proprietorship	Ontario Corporation
Legal Entity	No separate legal entity	Separate legal person
Personal Liability	Unlimited personal liability	Limited to capital invested
Setup Cost	$60 provincial fee	$300 provincial fee (+ NUANS if named)
Taxation	Taxed at personal graduated rates (up to 53.53%)	12.2% combined small business rate on first $500k
Annual Filings	Form T2125 with personal T1	T2 Corporate Tax + Ontario Annual Return
Name Protection	None (Registration only)	Provincial name protection
Capital Raising	Difficult (Personal loans only)	Can issue shares / equity

Next Steps

Test scenarios with our interactive Business Structure Comparison Tool.
Review all available entities on our Business Structures Guide.
Get started today with our Ontario Incorporation Walkthrough.

Frequently asked questions

What is the combined small business corporate tax rate in Ontario?

Eligible Canadian-Controlled Private Corporations (CCPCs) in Ontario pay a combined federal and provincial small business tax rate of 12.2% on active business income up to the $500,000 small business limit.

Does a sole proprietorship provide personal liability protection?

No. In a sole proprietorship, the owner is personally responsible for all business debts, lawsuits, contracts, and obligations.

Sole Proprietorship vs Corporation in Ontario: Which Is Better?

Comparing Ontario Business Structures

Head-to-Head Comparison Table

Next Steps

Frequently asked questions

Official sources

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