Sole Proprietorship vs. Corporation

A sole proprietorship is the simplest structure, with personal exposure

CRA defines a sole proprietorship as an unincorporated business owned by one individual. The owner makes the decisions, receives the profits, claims the losses, and has no legal status separate from the business.

That lack of separation is the key trade-off. CRA notes that the business risks can extend to the owner’s personal property and assets. Insurance and contracts matter regardless of the structure you choose.

Sources: Sole proprietorship

A corporation is a separate legal entity, with more administration

CRA says a corporation can enter contracts and own property in its own name, separately and distinctly from its owners. Shareholders own shares rather than owning the corporation’s assets directly.

Incorporation does not erase every personal risk or replace sound records, insurance, and contracts. It also brings incorporation filings, separate bookkeeping, and corporate tax compliance that should be costed before deciding.

Sources: Corporation

Use the decision questions that affect your real business

Do not incorporate solely because someone names a revenue number. There is no universal threshold in CRA guidance that makes incorporation automatically correct.

• What contractual, product, or professional liability could the business create?
• Will you need to retain money in the business, add owners, issue shares, or seek investment?
• Can you afford the additional bookkeeping, annual filings, professional advice, and corporate tax work?
• What provincial, territorial, or federal registration rules apply where you operate?

Sources: Setting up your business: business structure, Sole proprietorship, Corporation