Incorporate · By Industry
If your consulting income is steady and comfortably more than you need to live on, incorporating usually pays for itself. An Ontario corporation lets you keep retained earnings taxed at roughly 12.2%, defer personal tax, and bill clients through a business that looks established. Below about $60,000 of profit, a sole proprietorship is often simpler and cheaper.
If your consulting income is steady and comfortably more than you need to live on, incorporating usually pays for itself. An Ontario corporation lets you keep retained earnings taxed at roughly 12.2%, defer personal tax, and bill clients through a business that looks established. Below about $60,000 of profit, a sole proprietorship is often simpler and cheaper.
The honest answer is: it depends on your numbers, not on a rule of thumb someone repeated at a networking event. Incorporation shines when your consulting business earns more than you personally spend, because everything you don't draw out stays inside the corporation and is taxed at the small-business rate (about 12.2% in Ontario on the first $500,000 of active income) instead of your marginal personal rate, which climbs past 43% well before six figures.
That gap is the whole game. If you bill $180,000 and live on $90,000, the other $90,000 can sit in the company, taxed lightly, and be invested or paid out to you in a leaner year. That is tax deferral, and it is real money. But if you draw out everything you earn to cover your mortgage and groceries, most of that advantage disappears, and the roughly $600 of setup plus a few hundred a year in accounting may not be worth it yet.
A good gut-check: once you are consistently netting somewhere north of $60,000 to $100,000 and don't need all of it, it's worth running the actual math with an accountant. Below that, a sole proprietorship keeps your life simpler.
This is the one thing that trips up newly-incorporated consultants, and almost nobody warns them about it. If you leave a salaried job on Friday and come back Monday doing the same work, for the same company, under their direction, using their tools, but now invoicing through your corporation, the CRA may treat you as a "personal services business" (PSB). A PSB loses the small-business deduction entirely and is taxed at a punitive rate (around 44.5% federally-plus-provincially), and it can't deduct most normal business expenses.
In plain terms: incorporating to bill a single former employer who still controls how you work is exactly the arrangement the PSB rules exist to catch. It doesn't make you a criminal, but it can erase the tax benefit you incorporated for.
You reduce the risk by looking and operating like a genuine business: multiple clients over time, your own equipment, control over how and when you deliver, written contracts for outcomes rather than hours, and the ability to send someone else or take on other work. If most of your income will come from one client who treats you like staff, talk to an accountant before you file, because incorporation may not help you the way you expect.
For the vast majority of independent consultants (management, IT, marketing, HR, engineering advisory, strategy) a standard Ontario business corporation is the right vehicle. "Consultant" is not a regulated profession in Ontario, so you do not need a professional corporation (those are reserved for licensed professions like law, medicine, and accounting, and come with extra College rules). A plain OBCA corporation is simpler and does everything you need.
Numbered versus named is mostly a branding decision. A numbered corporation (e.g. 1234567 Ontario Inc.) is the fastest and cheapest option and is perfectly professional for a solo consultant who invoices under their own name. A named corporation (e.g. Northwind Advisory Inc.) costs a little more because it includes a NUANS name search, and it makes sense if you're building a brand, a website, or a practice you might one day sell or bring partners into.
You can start numbered and add a name later through an amendment, so there's no wrong first move here.
Once you're incorporated, you decide how money leaves the company, and the two levers are salary and dividends. Salary is a deductible expense for the corporation, generates RRSP room, and requires you to run payroll and remit source deductions. Dividends are simpler to administer, don't build RRSP room or CPP, and are paid from after-tax corporate profit. Most consultants use a mix, tuned each year with their accountant to their income needs and RRSP goals.
One caution on "income splitting": the tax-on-split-income (TOSI) rules introduced in 2018 sharply limited paying dividends to a spouse or adult children who aren't genuinely involved in the business. The old strategy of sprinkling dividends to family for tax savings mostly doesn't work anymore unless they meet specific exclusions (such as working an average of 20+ hours a week in the business). Don't incorporate expecting easy family income-splitting; incorporate for the deferral and the professionalism.
You answer a short questionnaire: your name preference, who the director and shareholder are, your Ontario registered office address, and your share structure. It takes about fifteen minutes, and we flag anything that looks off before you pay, not after.
We then prepare your Articles of Incorporation, By-law No. 1, organizational resolutions, and share registers, and file directly with the Ontario Business Registry. Most filings are submitted within one to two business hours, and your complete digital minute book lands in your inbox the same day: the exact documents your bank will ask for when you open a business account.
Three steps, no lawyer, no registry line-up.
Tell us about your practice
Choose numbered or named, name your director and shareholder, and give an Ontario registered office address. About fifteen minutes.
We prepare and file
CorpStart drafts your Articles, By-law No. 1, and resolutions, then files with the Ontario Business Registry, usually within 1 to 2 business hours.
Start invoicing
Your Certificate of Incorporation and digital minute book arrive by email the same day, ready for the bank and your first corporate invoice.
Sole proprietorship vs. incorporating as a consultant
| Factor | Sole proprietorship | Ontario corporation |
|---|---|---|
| Tax on retained profit | Your full personal rate (up to ~53.5%) | ~12.2% small-business rate |
| Tax deferral possible? | No | Yes, on income you don't draw out |
| Liability protection | None, you are the business | Limited to the corporation |
| Setup cost | Low ($60 name registration) | ~$579 all-in via CorpStart |
| Ongoing admin | Minimal | Annual return + corporate tax return |
| Best when profit is… | Under ~$60k or all needed to live on | Comfortably above what you spend |
I'm a solo consultant with one main client. Should I still incorporate?
Be careful here. If you work under that client's direction, on their schedule, with their tools, much like an employee, the CRA may classify your corporation as a personal services business, which loses the small-business deduction and most expense deductions. Incorporating works best when you have (or are building toward) several clients and genuinely control how you deliver your work. Talk to an accountant about your specific setup before filing.
Do consultants need a professional corporation?
No. Professional corporations in Ontario are reserved for licensed professions governed by a regulatory College: law, medicine, accounting, engineering, and similar. General consulting isn't a regulated profession, so a standard OBCA business corporation is the correct and simpler choice.
Numbered or named corporation for a consulting business?
A numbered corporation is faster and cheaper and looks perfectly professional if you invoice under your own name. Choose a named corporation if you're building a brand, a website, or a practice you may grow or sell. You can always add a name later through an amendment, so starting numbered is a safe default.
How fast can I be incorporated and invoicing?
Ontario online incorporations are processed immediately on government acceptance. CorpStart typically submits your filing within 1 to 2 business hours, and your digital minute book arrives the same day, so you can open a business bank account and send your first corporate invoice right away.
Can I incorporate now and figure out salary vs. dividends later?
Yes. Getting incorporated and deciding how to pay yourself are separate steps. Most consultants set their salary/dividend mix with an accountant at year-end once they know their income and RRSP goals. Incorporating first doesn't lock you into anything.
Ready to go incorporated?
$279 service fee + $300 Ontario government fee. Submitted to the Ontario Business Registry within 1 to 2 business hours, digital minute book the same day.
Start my corporationCorpStart is a document preparation service, not a law firm. The information on this page is general in nature and does not constitute legal or tax advice. For advice specific to your situation, consult a licensed lawyer or accountant.