When you start out on your own — whether as a freelance consultant, tradesperson or other professional — you’re automatically a sole proprietor. It’s the default setup for most self-employed folks.
But at some point, you might start wondering: Is it time to incorporate?
You don’t have to be a big company to register a corporation. Even a one-person business can incorporate. And for many small businesses, it can mean better protection and some solid tax advantages.
In this post, we’ll break it down:
VIDEO: Matt at True North Accounting talks about when a sole proprietor should incorporate.
As a sole proprietor, your business and personal finances are one and the same. Your business income gets reported on your personal tax return. Simple, yes — but it can come with risk and higher taxes as your income grows.
When you incorporate, you’re creating a separate legal entity. That means:
✔️ The corporation earns its own income
✔️ It owns its assets
✔️ It takes on its own liabilities
✔️ And it pays its own taxes
The corporation runs the business. Then it pays you.
Here are some key questions to ask yourself:
If you answered yes to one or more of these, it might be time to consider incorporation.
Incorporating comes with a few perks that sole proprietorships just can’t offer:
If something goes sideways — say you get sued or a loan goes unpaid — being incorporated limits how much of your personal life is on the line. That means your house, car and retirement savings are better protected.
To get this right, it’s best to talk to a lawyer and an accountant. (We can connect you with both.)
Sole proprietors pay personal tax on all their business income. And if you’re doing well, that could bump you into a high tax bracket.
Corporations, on the other hand, pay just 11% tax on the first $500,000 of active business income in Alberta. You can pay yourself what you need for living expenses (through wages or dividends), and leave the rest in the company — for savings, investments, or big purchases like vehicles or equipment.
Corporations can build business credit and equity, which makes it easier to get loans, attract investors or qualify for government grants. If you’re planning to grow, incorporation gives you more flexibility.
Incorporation might be the right next step if:
When you're ready to take that next step and incorporate, you've got two main options: hire a lawyer or do it yourself.
We always recommend working with a lawyer to get your corporation set up right from the start. They’ll create your minute books, issue your share certificates and make sure your corporate structure is legally sound.
Your accountant will advise on the tax implications of the share structure, but it’s the lawyer who ensures your setup fits your business goals.
A lawyer will typically charge between $900–$1,200.
If you’re comfortable doing it yourself, you can incorporate:
If you incorporate yourself, you’ll also need to create your own minute books and issue share certificates. Need help incorporating? Reach out to us.
Important: You can incorporate federally through the Government of Canada’s Online Filing Centre, but we don’t recommend it. You’ll still need to register your business provincially, which adds about $500 more in fees.
We’ve broken it all down for you in this step-by-step guide:
👉 How to incorporate your small business in Canada
Start here if you’re ready to make the switch: Incorporate a business in Alberta
Whether you’re still weighing the pros and cons or ready to make the leap, we’re here for you.
📩 Reach out to us — we’ll help you figure out what makes the most sense for your business and your future.
✅ Download our free ebook: The Path to Starting Your Own Business
✅ Check out more helpful reads in our Starting a Business blog series