Sole Proprietorship vs Corporation in Ontario: Which Is Better?
A comprehensive comparison of sole proprietorships vs corporations in Ontario: liability protection, corporate tax rates, setup costs, and reporting obligations.
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.
Official sources
- Ontario Business Registry ↗— file and search Ontario registrations
- Corporations Canada ↗— federal incorporation
- Canada Revenue Agency — business ↗— BN, HST, payroll, T2
Related articles
Everything you need to know about the Ontario NUANS (Newly Upgraded Automated Name Search) report, 90-day validity, distinctive vs descriptive terms, and reservation rules.
Everything you need to know about filing the Ontario Annual Information Return via the Ontario Business Registry, 6-month deadlines, and preventing corporate dissolution.
Understand the CRA $30,000 small supplier threshold in Ontario, when mandatory GST/HST registration triggers, voluntary registration benefits, and filing frequencies.
A complete breakdown of Ontario incorporation expenses: official $300 OBR filing fee, NUANS search fees, corporate minute book costs, and ongoing annual filings.
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