Incorporate In Ontario: 6 Compelling Reasons To Incorporate Your Business

Compelling Reasons To Incorporate Your Business

Many businesses start small and as a sole proprietorship. It’s a convenient set up initially and may present a few upsides. However, it may hold you back in the future, especially if your business is starting to grow and expand. One way to escape the pitfalls of a sole proprietorship and get your business to flourish is through incorporation. Doing this may be the best business move you’ll make this year.

There are different types of corporations: Ontario Profit Corporations (OBCA), Professional Incorporations, Not For Profit (ONCA), and Charitable Incorporations. Each type offers several advantages and disadvantages. In most cases, your choices will be limited according to your situation. Nonetheless, you need to decide wisely.

With that out of the way, below are six compelling reasons to incorporate your business.

1. Liability Protection

Perhaps the most significant disadvantage of a sole proprietorship is you and your business are considered the same entity. Any issue that may arise concerning your business will be directly attributed to you, including your company’s debts and other liabilities.

Now, let’s say you incorporate in Ontario. Even if your business collects massive debts it can’t pay or faces other legal issues, you and your personal assets are a separate entity from your corporation. Therefore, you are an arms-length from liability.

2. Growth Potential

In a sole proprietorship, there can be only one owner of the company. This can limit the options you can utilize to expand your business. By incorporating, you can remove that limitation and introduce partners and stakeholders into your business. Thus, opening the opportunity to grow your capital by selling parts of the company.

It's true you have the option to form a partnership, but it comes with most of the problems of a sole proprietorship. The main difference is you’ll share the business liabilities with your partners. This isn’t something most investors or potential stakeholders want to risk. There are other partnership setups like limited liability partnerships. However, they’re limited to certain types of businesses, such as law and accounting firms.

Also, incorporating your business can make it easier to secure funding from banks. Many financial institutions limit their loans or are reluctant to give loans to sole proprietorships because they generally view them as less reliable and established.

3. Separate Entity

When you incorporate in Ontario, you’ll effectively separate yourself from your business and give it a life of its own. In a sole proprietorship, if the owner dies, the company dies as well. Thus, leaving its employees, customers, and everything with it in a devastating state. If someone decides to take over the business, that person will need to go through many legal and business loops to do so.

Through incorporation, however, you can secure your employees’ livelihood, customers, and business operations even when you’re gone. And, on the off chance you want to leave the company, you can do so in a relatively easy and fast manner. Just take your share and say “take care” to the ones you’ll leave behind.

4. Credibility

Aside from improving your reputation with banks and other financial institutions, having a legal ending on your business name such as, “inc.,” “corp.,” or LTD. increases your credibility. Prospects, customers, and the government will show your organization more respect with these titles. Always consider how your business name will sound when you start the incorporation process. Ensure it sounds respectable and professional.

Additionally, as a sole proprietor, is it important to consider that when dealing with your customers or third-party companies you will have to put your name, personal accounts, and other personal information on your professional documents.

Compare that situation to having your incorporated business name, accounts, and information on those documents. Perception is important when running a business. Incorporation provides an extra touch of professionalism to your business.

business structure

5. Tax Benefits

Aside from sharing liabilities, you also share your taxes with your business if you are a sole proprietor. By incorporating, you separate your taxes from your business. Nevertheless, there are taxation options available for you to avoid higher taxes and reduce other hidden costs of your business.

6. Detaches your business from your personal credit

Incorporating clearly separates you from your business. This means your business can have its own credit line and history. This effectively makes it easy for you to manage your finances. You can also keep your employees and other business partners out of your personal credit.


These six reasons are just a few of the benefits you can receive when you incorporate your business in Ontario. Depending on the type of corporation your business falls under, you may even reap additional advantages. Make the right decision and incorporate today!

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