When and How Should I Incorporate My Business to CRA?

Incorporation- A smart integration to obtain profit without individual responsibility In this blog we’re peeking an in-depth analysis: If you are a business owner looking to incorporate or an individual seeking to establish a business and assuming, is this the right move to dive straight into a corporation? Then this blog is for you as it will help you with all of these answers. Before we get into anything, let’s have a brief view of what is a corporation.

What is a Corporation?

The term “corporation” is defined in three simple words- A separate legal entity, like giving birth to a new entity or creating a new structure. Mostly, people think about a board of directors, multiple owners, and public shares involved in a corporation. All these aspects might be genuine because every corporation needs shareholders or a board of directors to operate. Now it’s time to discuss the main course, why do you need to incorporate a business while residing in Mississauga, Ontario? See below:


Incorporation of buisness Well, people think that their business idea will fly them through the entire process to incorporate, however, it’s a challenging task and also quite expensive at the start and hard to maintain also. So why do people incorporate? Well, there are three core reasons.

1.    Legal Sense

Limited Liability: It helps you to get a layer of legal protection and secure personal belongings and assets. For example, if your corporation is sued, shareholders or owners will not be liable for that loss even if the corporation doesn’t have money to repay the debts. Limited liability is one of the leading factors businesses attract to incorporate CRA. It is important to understand that Limited Liability does not mean you can get away with anything, however, it may concern the owner. If the court finds something with criminal intent, they will order you to take your personal assets into their custody. A classic example would be the Nortel Case. Additionally, professional corporations do not have limited liability security. In case the corporation gets sued, owners will be treated accordingly as if they’d be equally responsible for the loss.

2.    Business Sense

Other than Legal and Taxes Sense, you might need to incorporate your business because it makes business and/or logistical sense. Beyond doubt, being incorporated gives you a professional outlook when it comes to presenting your business within the industry. Ask yourself these questions to determine if it is the right time to incorporate:
  • Is the business going to be operating in an industry where they do not deal with you if you are not incorporated?
  • Will you be selling your business in the future?
  • Are you looking for a title like CEO, Director, or President to help you better market your business?
  • Is securing your company name Legally important for you? Will you be registering Trademarks and Patents?
  • Your personal side has lots of moving parts and you want to keep your business separate for logistical reasons?
  • Is the business going to be doing business activity in other countries? Being incorporated helps logistically and tax-wise.

3.    Tax Sense

Personal Tax rates are much higher than corporate tax rates here in Canada. On the personal side, you can easily go as high as 53.5%. By incorporating you can easily lower your business tax rate down to 12.2% here in Ontario, Canada. From a tax perspective, you should consider incorporating your business when your Net Income goes above 45K. At 45K the cost of having a corporation equals the tax benefits and any additional profits should be made under the corporation. If you are hitting the benchmark of 45K, speak to one of our accountants at BG Accounting and Business Solutions and we can help you through the process of incorporating your business to CRA. That being said, if your business is operating under a loss, it is best in most cases to operate as a sole proprietorship as the losses will help you lower your overall taxable income and generate nice refunds. If any of the above-mentioned factors are relevant to your case, you should consider incorporating your business. Remember, before making any quick decision, kindly reach one of our experts at BG Accounting and Business Solutions to get the best advice. Now, that we know comprehensively why businesses incorporate, let’s have a quick view of what a sole prop is before we uncover the primary differences b/w a sole prop and a corporation.

When to Incorporate Business into CRA?

It’s important to think about when to incorporate your business into CRA to take the best step forward. Most of the time, people think they should incorporate it from day one well, but the answer is NO because it can be costly at the beginning. BG Accounting and Business Solutions suggest you incorporate it when your company starts to receive high returns on its investment. Talk with one of our experts at BG Accounting and Business Solutions for the best advice. Initially, there’s a start-up fee, which might be costly. Once started, then consider the other transitional costs if moving from a sole proprietorship. Fortunately, limited liability protection starts instantly, and given the other benefits, it may be best to incorporate it now rather than wait for good times.

How to incorporate a business to CRA?

Step 1: Give your company a name.

Start with a good and legal company name. The name can be of two types:
  • word name, a blend of letters and symbols. A NUANS search is required; or
  • numbered name, for example, 12345678Canada Inc. OR 9876543 Ontario Corp.
Step 2: Submit articles of incorporation It helps to build the structure of your corporation. Standard incorporation will be the best if you are establishing a small business to CRA. You can also choose from the pre-defined articles for your business and amend them later. Step 3: Register the office address and personnel. The next step is to get the physical address of your corporation for any business activities. It allows you to receive and send legal documents under the right business name CRA. In addition, you must finalize the panel of the board of directors of a corporation. Step 4: Fee Submission Fees for Federal and Provincial incorporations vary per province. This blog has a basic idea to help you to decide that there are many other variables like personal income into CRA, marital status, and short/long-term goals which may impact your decision on it. Reach out to one of our accounting and tax expert at BG Accounting and Business Solutions for a prolific answer.