Free screening · 6 questions

Should I Incorporate? Free screening for Canadian sole proprietors and small-business owners.

Free 6-question screening for Canadian small-business owners deciding whether to incorporate now or stay sole proprietor. Verdict in under a minute.

Three steps from home, to small storefront, to corporate building with certificate, illustrating the path from sole proprietor to incorporated business
Context

Should you incorporate your business in Canada?

Incorporation is a layered decision and the real call depends on more variables than any tool can fully capture. This screening focuses on the six biggest ones for a quick first read; treat the result as a starting point, not the final answer.

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Why business owners incorporate

Three benefits drive most incorporation decisions in Canada. First, tax deferral: profits left inside an active Canadian-Controlled Private Corporation pay 9% to 12% combined federal and provincial on the first $500,000 of active business income, while personal marginal rates can clear 50% above $250,000. If you can leave money inside the company instead of taking it home, that gap compounds across years and becomes the foundation of most tax planning for incorporated owners. Second, structure and income splitting: a corporation lets you allocate ownership to family members, plan dividends across years, and add a holding company on top. Third, liability protection: a corporation is a separate legal entity, so most lawsuits and contractual claims stop at the company, not at your personal assets. The shield is not absolute, but it is real.

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When incorporation is not yet worth it

Three signals make incorporation a bad fit, at least for now. You take everything home: if personal expenses absorb every dollar the business earns, you cannot defer anything inside the company and the tax benefit evaporates. Profit is too low to absorb compliance: a T2 corporate return, GST/HST return, bookkeeping, and payroll in a corporate shell carry meaningful additional costs every year, and at low profit those fixed costs quickly wipe out the deferral upside. The business is short-lived or volatile: setup, ongoing compliance, and dissolution all take time and money, so incorporation rewards multi-year stability and punishes uncertainty.

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How this screening works

The six questions below cover the core trade-offs: profit level, deferral capacity, reinvestment plan, income stability, compliance tolerance, and liability exposure. Your score maps to one of four verdicts, from "Strong yes" to "Not yet". Treat this as a heuristic, not legal or tax advice. Use the result to decide whether incorporation is worth a deeper look with an accountant who knows your specific province and personal-tax position.

Question 1 of 6: What is your annual business profit before tax?

What is your annual business profit before tax?

Net profit on your books, before personal income tax.

Question 2 of 6: How much of that profit do you actually need to take out for personal living expenses?

How much of that profit do you actually need to take out for personal living expenses?

The bigger the gap between what the business earns and what you live on, the bigger the deferral case for incorporating.

Question 3 of 6: Do you plan to reinvest profits into the business rather than take them home?

Do you plan to reinvest profits into the business rather than take them home?

Reinvested profit is the lever that makes incorporation pay off, every dollar held inside the company is taxed at the small-business rate, not at your personal bracket.

Question 4 of 6: How stable is your business income year over year?

How stable is your business income year over year?

Question 5 of 6: Are you OK with the additional costs of running a corporation (T2, GST/HST return, bookkeeping, payroll, etc.)?

Are you OK with the additional costs of running a corporation (T2, GST/HST return, bookkeeping, payroll, etc.)?

Question 6 of 6: What is your liability exposure (contracts, employees, IP, claims that could lead to lawsuits)?

What is your liability exposure (contracts, employees, IP, claims that could lead to lawsuits)?

0 of 6 answered

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