Sole proprietorship in Ontario: the complete guide
The simplest way to run a business in Ontario: one owner, no corporation, minimal paperwork.
Step by step
- Pick a business name. Use your exact legal name (no registration needed) or choose a trade name and check it's not in use.
- Register the name in the OBR. Register online through the Ontario Business Registry. You receive a Business Identification Number and a Master Business Licence.
- Get a CRA business number if needed. Required once you register for HST, payroll or import/export.
- Register for HST when required. Mandatory once taxable revenue passes $30,000 in four consecutive calendar quarters; voluntary before that.
- Get municipal licences. Check your city for business licences or permits that apply to your activity.
How a sole proprietor is taxed
Profit is added to your personal income and taxed at your personal federal and Ontario rates. You report it on Form T2125 with your T1 return. If you owe tax at the end of the year, it's due by April 30, even though self-employed filers have until June 15 to file.
Pros and cons
- Pro: cheapest and fastest setup; simple bookkeeping and taxes.
- Pro: business losses can offset other personal income.
- Con: unlimited personal liability for business debts and lawsuits.
- Con: no access to the small-business corporate tax rate; harder to bring in investors.
When to switch to a corporation
Many owners incorporate once profit exceeds what they need to live on (so earnings can be taxed at the lower corporate rate), or when liability risk grows. See our comparison of structures.
Frequently asked questions
Do I need to register a sole proprietorship in Ontario?
Only if you operate under a name other than your exact legal name. Adding any word, such as 'Consulting', requires registration.
How long does a sole proprietorship registration last?
Five years. You must renew it through the Ontario Business Registry before it expires.
Is a sole proprietor personally liable?
Yes. There is no legal separation, so your personal assets can be used to pay business debts.
Can a sole proprietor have employees?
Yes. You'll need a CRA payroll account, and possibly WSIB registration and Employer Health Tax depending on payroll size.