Incorporate vs Sole Proprietor: The Real Trade-Off
Quick answer: A sole proprietorship is you, doing business; a corporation is a separate legal person you own. That separation is the whole trade: it can shield personal assets and defer tax on profit left inside — in exchange for a corporate return, separate books, and real ongoing cost. The deciding variable is rarely revenue: it is how much profit you can leave in the company.
Liability and risk
As a sole proprietor, business debts and claims are personal ones. A corporation is a separate legal person — which can protect personal assets, though not absolutely: lenders often want personal guarantees, and professional liability follows the professional. The shield is real; it is just narrower than the brochure version.
Tax and deferral
A sole proprietor’s profit lands on the personal return in full, every year, at personal rates. A corporation’s active profit is taxed first at the small-business rate — roughly 11% in BC — and personal tax applies only when money comes out. Draw everything you earn and the advantage mostly evaporates; leave profit inside and the deferral compounds. The incorporation calculator puts numbers on your own retained amount.
Cost and paperwork
Incorporation brings a one-time setup cost and a permanent second taxpayer: a T2 every year, statements behind it, separate bookkeeping, and a payroll or dividend mechanism to pay yourself. Those are real dollars — the fee table shows them — and they are the reason incorporating too early is the most common structure mistake.
How to decide
Run the calculator on profit you would actually retain, not revenue. Watch the personal services business trap if most income comes from one client. And treat it as reversible judgement, not identity — the right structure at one stage is often wrong at another, which is what a free consult is for.
General information, not tax advice. Every situation differs — confirm anything that affects a decision on a free consult.