Topic
Business structure
Sole proprietorship, partnership, corporation, holding company: which form fits, and what changes when you switch.
Choosing a business structure is one decision that quietly makes a dozen others: what you pay
to set up and maintain, who is liable when something goes wrong, how income is taxed, and how
hard the business is to sell, split, or pass on. The menu in Canada is short: sole
proprietorship, partnership, corporation, and for some licensed professionals a professional
corporation, with holding companies as a second-storey option once real value accumulates.
The structures compared
Incorporation is not automatically the upgrade it sounds like: below certain income and risk
levels, its costs and filings buy little. The tipping points are income you don’t need to spend
personally, meaningful liability exposure, or outside investors.
Start with these answers
Mistakes in structure decisions
- Incorporating for status rather than function. If every dollar comes out as personal
income anyway, the corporation’s main output is filings.
- Partnering on a handshake. A partnership can exist without any paperwork, which means
its default rules (including shared liability) apply without any paperwork too.
- Ignoring the professional-corporation rules of the regulator. Licensing bodies restrict
ownership and don’t shield professional negligence.
- Leaving retained earnings exposed. Once a corporation accumulates real value, a holding
company structure is worth pricing out; it is much harder to add cleanly later.
Official starting points
Guide last updated August 8, 2026.
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