How to Incorporate a Business in Ontario: Step-by-Step

Incorporating a business is one of the most significant financial and legal decisions you will make as an Ontario entrepreneur. It affects your taxes, your liability, and how your business is perceived by clients and lenders. This guide walks you through the entire process — from deciding whether to incorporate, to the step-by-step mechanics of actually doing it.

Should You Incorporate? The Financial Case

The primary financial reason to incorporate is the small business deduction (SBD). A Canadian-Controlled Private Corporation (CCPC) earning active business income pays federal tax at 9% on the first $500,000 of net income, compared to the top personal marginal rate in Ontario of approximately 53.5%.

This creates a significant tax deferral opportunity: if you earn $200,000 in business income but only need $80,000 to live on, a corporation can pay tax at 9-12% on the retained $120,000, while you would pay 43-53% on that same amount personally. The deferred tax can be reinvested in the business.

Federal vs. Provincial Incorporation

You have two choices for incorporating in Ontario: federally under the Canada Business Corporations Act (CBCA), or provincially under the Ontario Business Corporations Act (OBCA).

Federal Incorporation (CBCA)

• Corporate name protected across all provinces and territories
• Right to carry on business in any province (with extra-provincial registration)
• Better for businesses planning national expansion
• Federal filing fee: $200 online
• Must also register to carry on business in Ontario (additional $60)

Provincial Incorporation (OBCA)

• Lower overall cost for Ontario-only businesses
• Simpler ongoing maintenance requirements
• Ontario provincial fee: $300 online or by mail
• Name protection only within Ontario
• Administered by ServiceOntario

Step-by-Step: How to Incorporate in Ontario

Step 1: Choose a Corporate Name

Your corporation needs a unique name that includes a legal element (Inc., Ltd., Corp., Limited, Incorporated, or Corporation). You can search the NUANS (Newly Upgraded Automated Name Search) database to check name availability. A NUANS report costs approximately $13.80 for a 5-day window. Alternatively, you can use a numbered company (e.g., 1234567 Ontario Inc.) which is faster and cheaper.

Step 2: Prepare Articles of Incorporation

Articles of Incorporation are the foundational document of your corporation. They specify: the corporation's name, the province of the registered office, the first directors, the classes and maximum number of shares, and any restrictions on business activities or share transfers.

For most small businesses, a simple share structure works well: unlimited common shares with no restrictions. Your CPA can advise on whether multiple share classes (to allow income splitting with family members) make sense for your situation.

Step 3: Register and File

For Ontario provincial incorporation, file Articles of Incorporation through ServiceOntario or through a law firm. The government processing time is typically 5–15 business days, with expedited options available.

Step 4: Post-Incorporation Requirements

After incorporation, you need to complete several administrative steps: hold an organizational meeting, create the corporate minute book, issue shares to shareholders, appoint directors and officers, register for a CRA Business Number, register for HST (if applicable), and open a corporate bank account.

Ongoing Costs of a Corporation

Incorporating is not free after the initial setup. Annual costs include: corporate tax return (T2) preparation ($800–$2,500+ per year through a CPA), annual return filing with ServiceOntario ($12/year), and potentially more complex bookkeeping requirements.

These costs need to be weighed against the tax savings. At modest income levels, the accounting costs may outweigh the tax benefits — which is why the $80,000–$100,000 net income threshold is often cited as the breakeven point.