Start a business Sole proprietorship or corporation
Sole proprietorship or corporation in Canada?
Start as a sole proprietorship if you want the cheapest, simplest setup: in Ontario a business name costs $60 to register, and your business income goes on your personal tax return. Incorporate when you need to separate business debts from your personal assets, want to keep profit in the company at a lower tax rate, or plan to apply for funding that only corporations can get: 234 of the 882 programmes GrantCompass tracks (27%) require incorporation. Fees and counts as of September 28, 2026.
What is a sole proprietorship?
A sole proprietorship is a business owned by one person that is not a separate legal entity: the business is you. Its income goes on your personal tax return, its debts are your debts, and if you sell something on your own account you are already one. A corporation is the opposite: a separate legal entity that owns its property, signs its own contracts and pays its own tax, while its shareholders are not responsible for its debts.
The difference, in one table
| What matters | Sole proprietorship | Corporation | Which wins, and when |
|---|---|---|---|
| Cost to set up | $60 to register a name in Ontario, renewed every 5 years. Nothing if you trade under your own legal name. | $300 in Ontario or $200 federally, online. | Sole proprietorship |
| Your personal assets | The business is you, so its debts are your debts. | A separate legal entity: shareholders are not responsible for its debts. | Corporation, if you carry real risk |
| Tax | Profit is taxed as your personal income, reported on Form T2125. | Taxed separately. With the small business deduction, profit kept in the company is taxed at 9% federally plus 3.2% in Ontario, on the first $500,000. | Corporation, once profit is more than you need to live on |
| Paperwork | Your personal return, plus GST/HST once sales pass $30,000. | A corporate tax return, an annual return (free in Ontario, due within 6 months of fiscal year-end) and the same GST/HST rule. | Sole proprietorship |
| Funding you can apply for | 648 of 882 programmes. | All 882, including the 234 that require a corporation. | Corporation, if you need one of those programmes |
Sources: ServiceOntario fees, Corporations Canada fees, Corporations Canada: benefits of incorporating, CRA corporation tax rates, CRA: when to register for GST/HST.
Choose a sole proprietorship when
- You are testing an idea and want to start selling this month for the lowest cost.
- Your profit is what you live on. Money you take out of a corporation is taxed again in your hands, so a corporation saves little until the business earns more than you spend.
- Your risk is low: no staff, no lease, no large contracts, and nothing a customer could claim large damages over.
- The funding you want does not require a corporation. Check your province in the tool below before you decide.
In Ontario you don't need to register at all if you trade under your own legal name. The Business Names Act only requires registration for a name other than your own.
Incorporate when
- You carry real risk: employees, a commercial lease, contracts with large customers, or debts you don't want to follow you home.
- You earn more than you need to take out. Profit left in a Canadian-controlled private corporation is taxed at the small business rate above, not your personal rate.
- You plan to raise money. A corporation can sell shares to investors; a sole proprietorship cannot.
- You want funding that requires it. 234 programmes do: 123 grants, 53 tax credits and 23 loans among them.
What incorporating unlocks in funding
This is the part no registry or accountant can tell you: which funding programmes only a corporation can apply for, where your business is. Pick your province.
All of Canada
234 of the 882 programmes we track across Canada (27%) require the business to be incorporated. As a sole proprietor you can still apply to the other 648.
| Programme | Type | Amount | Where |
|---|---|---|---|
| Yukon Venture Loan Guarantee Program | Loan | $10,000–$100,000 guarantee (65% of loan principal) | Yukon |
| MaRS Discovery District Programs | Program | In-kind advisory (no cash) | Ontario |
| Mitacs Accelerate Entrepreneur Program | Grant | Varies | Canada-wide |
| Manitoba Small Business Venture Capital Tax Credit (SBVCTC) | Tax credit | Up to $10M raised (max $500K credit per company) | Manitoba |
| ElevateIP Program | Program | Up to $100K | Canada-wide |
Ontario
120 of the 475 programmes we track for a business in Ontario (25%) require the business to be incorporated. As a sole proprietor you can still apply to the other 355.
| Programme | Type | Amount | Where |
|---|---|---|---|
| MaRS Discovery District Programs | Program | In-kind advisory (no cash) | Ontario |
| Mitacs Accelerate Entrepreneur Program | Grant | Varies | Canada-wide |
| ElevateIP Program | Program | Up to $100K | Canada-wide |
| OCI Ready 4 Market Fund | Program | Up to $250K (pre-seed) | Ontario |
| Ontario Interactive Digital Media Tax Credit (OIDMTC) | Tax credit | Up to $100K | Ontario |
Quebec
111 of the 384 programmes we track for a business in Quebec (29%) require the business to be incorporated. As a sole proprietor you can still apply to the other 273.
| Programme | Type | Amount | Where |
|---|---|---|---|
| IQ Fonds Impulsion (formerly Impulsion PME) | Program | $250K–$2M | Quebec |
| Mitacs Accelerate Entrepreneur Program | Grant | Varies | Canada-wide |
| ElevateIP Program | Program | Up to $100K | Canada-wide |
| CED Quebec: Quebec Economic Development Program (QEDP) | Loan | $50K–$500K typical | Quebec |
| Quebec AI Adoption Tax Credit (CDAEIA) | Tax credit | 30% rate | Quebec |
British Columbia
90 of the 359 programmes we track for a business in British Columbia (25%) require the business to be incorporated. As a sole proprietor you can still apply to the other 269.
| Programme | Type | Amount | Where |
|---|---|---|---|
| BC Small Business Venture Capital Tax Credit | Tax credit | Up to $300,000 per investor | British Columbia |
| Mitacs Accelerate Entrepreneur Program | Grant | Varies | Canada-wide |
| ElevateIP Program | Program | Up to $100K | Canada-wide |
| Northern Development Initiative Trust (NDIT): Competitiveness Consulting Rebate | Grant | Varies | British Columbia |
| InBC Investment Fund | Program | $3M–$10M | British Columbia |
Alberta
91 of the 363 programmes we track for a business in Alberta (25%) require the business to be incorporated. As a sole proprietor you can still apply to the other 272.
| Programme | Type | Amount | Where |
|---|---|---|---|
| Mitacs Accelerate Entrepreneur Program | Grant | Varies | Canada-wide |
| ElevateIP Program | Program | Up to $100K | Canada-wide |
| Alberta Film and Television Tax Credit (FTTC) | Tax credit | Varies | Alberta |
| Alberta Innovation Employment Grant | Tax credit | Up to $4M | Alberta |
| Methane Reduction Deployment Program (MRDP) | Grant | Varies | Alberta |
Manitoba
89 of the 353 programmes we track for a business in Manitoba (25%) require the business to be incorporated. As a sole proprietor you can still apply to the other 264.
| Programme | Type | Amount | Where |
|---|---|---|---|
| Manitoba Small Business Venture Capital Tax Credit (SBVCTC) | Tax credit | Up to $10M raised (max $500K credit per company) | Manitoba |
| Mitacs Accelerate Entrepreneur Program | Grant | Varies | Canada-wide |
| ElevateIP Program | Program | Up to $100K | Canada-wide |
| Industry Expansion Program | Grant | Varies (custom) | Manitoba |
| Manitoba Community Enterprise Development Tax Credit (CEDTC) | Tax credit | Varies | Manitoba |
Saskatchewan
90 of the 352 programmes we track for a business in Saskatchewan (26%) require the business to be incorporated. As a sole proprietor you can still apply to the other 262.
| Programme | Type | Amount | Where |
|---|---|---|---|
| Mitacs Accelerate Entrepreneur Program | Grant | Varies | Canada-wide |
| ElevateIP Program | Program | Up to $100K | Canada-wide |
| Saskatchewan Commercial Innovation Incentive (SCII) | Tax credit | Reduced corp tax to 6% | Saskatchewan |
| Saskatchewan Technology Startup Incentive (STSI) | Tax credit | Up to $2M | Saskatchewan |
| Saskatchewan Chemical Fertilizer Incentive (SCFI) | Tax credit | 15% of $10M+ capex | Saskatchewan |
Nova Scotia
84 of the 359 programmes we track for a business in Nova Scotia (23%) require the business to be incorporated. As a sole proprietor you can still apply to the other 275.
| Programme | Type | Amount | Where |
|---|---|---|---|
| Nova Scotia CEDIF Equity Tax Credit | Tax credit | 35% rate | Nova Scotia |
| Mitacs Accelerate Entrepreneur Program | Grant | Varies | Canada-wide |
| ElevateIP Program | Program | Up to $100K | Canada-wide |
| Business Development Program (BDP) - ACOA | Forgivable loan | Up to $3M (loan) | Several provinces |
| Nova Scotia Film & Television Production Incentive Fund | Grant | Up to $10M/project | Nova Scotia |
New Brunswick
82 of the 346 programmes we track for a business in New Brunswick (24%) require the business to be incorporated. As a sole proprietor you can still apply to the other 264.
| Programme | Type | Amount | Where |
|---|---|---|---|
| NB Small Business Investor Tax Credit (SBITC) | Tax credit | Up to $125K | New Brunswick |
| Mitacs Accelerate Entrepreneur Program | Grant | Varies | Canada-wide |
| ElevateIP Program | Program | Up to $100K | Canada-wide |
| Business Development Program (BDP) - ACOA | Forgivable loan | Up to $3M (loan) | Several provinces |
Newfoundland and Labrador
83 of the 342 programmes we track for a business in Newfoundland and Labrador (24%) require the business to be incorporated. As a sole proprietor you can still apply to the other 259.
| Programme | Type | Amount | Where |
|---|---|---|---|
| Mitacs Accelerate Entrepreneur Program | Grant | Varies | Canada-wide |
| ElevateIP Program | Program | Up to $100K | Canada-wide |
| Business Development Program (BDP) - ACOA | Forgivable loan | Up to $3M (loan) | Several provinces |
| Investment Attraction Fund | Loan | Custom amount — no published cap | Newfoundland and Labrador |
| Newfoundland and Labrador Film and Video Tax Credit | Tax credit | 40% of NL labour, $5M cap | Newfoundland and Labrador |
Prince Edward Island
79 of the 344 programmes we track for a business in Prince Edward Island (23%) require the business to be incorporated. As a sole proprietor you can still apply to the other 265.
| Programme | Type | Amount | Where |
|---|---|---|---|
| Mitacs Accelerate Entrepreneur Program | Grant | Varies | Canada-wide |
| ElevateIP Program | Program | Up to $100K | Canada-wide |
| Business Development Program (BDP) - ACOA | Forgivable loan | Up to $3M (loan) | Several provinces |
| Prince Edward Island Film Production Fund | Grant | 32-35% rebate | Prince Edward Island |
Yukon
78 of the 325 programmes we track for a business in Yukon (24%) require the business to be incorporated. As a sole proprietor you can still apply to the other 247.
| Programme | Type | Amount | Where |
|---|---|---|---|
| Yukon Venture Loan Guarantee Program | Loan | $10,000–$100,000 guarantee (65% of loan principal) | Yukon |
| Mitacs Accelerate Entrepreneur Program | Grant | Varies | Canada-wide |
| ElevateIP Program | Program | Up to $100K | Canada-wide |
Northwest Territories
75 of the 321 programmes we track for a business in Northwest Territories (23%) require the business to be incorporated. As a sole proprietor you can still apply to the other 246.
| Programme | Type | Amount | Where |
|---|---|---|---|
| Mitacs Accelerate Entrepreneur Program | Grant | Varies | Canada-wide |
| ElevateIP Program | Program | Up to $100K | Canada-wide |
Nunavut
75 of the 320 programmes we track for a business in Nunavut (23%) require the business to be incorporated. As a sole proprietor you can still apply to the other 245.
| Programme | Type | Amount | Where |
|---|---|---|---|
| Mitacs Accelerate Entrepreneur Program | Grant | Varies | Canada-wide |
| ElevateIP Program | Program | Up to $100K | Canada-wide |
Counts come from the 882 programmes in the GrantCompass catalogue that are open or between intakes, as of September 28, 2026. A programme counts when its own rules require a corporation.
The quiz below counts only programmes taking applications today and narrows them to your answers, so its number is smaller than the totals above.
Can you start as a sole proprietor and incorporate later?
Yes, and many founders do: start simple, then incorporate once profit, risk or a funding application makes it worth it. Moving an existing business into a corporation has tax rules of its own, because the business's assets are transferred to the new company. Speak to an accountant before you switch, and time it before you apply for any programme that requires a corporation.
Federal or provincial incorporation?
A federal corporation costs $200 online and protects your name across Canada, but you still register it in each province where you do business. A provincial corporation costs $300 in Ontario and is simpler if you will only ever work in one province. Federally, you don't need to order a separate Nuans name search to incorporate online with a word name; the name check is built into the process.
Questions people ask
Is it better to incorporate or be a sole proprietor in Canada?
For most new businesses with low risk and modest profit, a sole proprietorship is better at the start: it costs $60 in Ontario and needs no corporate tax return. Incorporate once you have real liability, profit you don't need to take out, investors, or a funding programme that requires a corporation; 234 of the 882 programmes GrantCompass tracks do.
Do you pay more taxes as a sole proprietor or a corporation?
It depends on how much you take out. A sole proprietor pays personal income tax on all profit. A Canadian-controlled private corporation claiming the small business deduction pays 9% federally plus 3.2% in Ontario on the first $500,000 of active business income, but money you then pay yourself is taxed again personally. The saving comes from profit you leave in the company.
What qualifies you as a sole proprietor?
Running a business on your own account, as one person, without incorporating. There is no application to become one: you are a sole proprietor as soon as you sell as an individual. You register only to use a name other than your own, and you report the income on Form T2125.
Do you need to register a sole proprietorship in Canada?
Only if you use a business name other than your own legal name. In Ontario, registering a name costs $60 online and lasts 5 years. Separately, you need a GST/HST account once taxable sales pass $30,000.
Do you have to claim business income under $30,000?
Yes. $30,000 is the GST/HST small-supplier threshold, not an income tax exemption. A sole proprietor reports all business income and expenses on Form T2125 with their personal return.
What is the biggest disadvantage of a sole proprietorship?
You and the business are the same legal person, so its debts are yours. The second, less known: 234 funding programmes, 27% of those GrantCompass tracks, only accept incorporated businesses.
What is the biggest disadvantage of a corporation?
Cost and paperwork: $300 to incorporate in Ontario ($200 federally), a separate corporate tax return every year, an annual return, and more formal records. For a small, low-risk business earning what its owner lives on, that cost often buys little.