A sole proprietorship is an unincorporated business owned by one individual. A corporation has a separate legal identity. The choice affects administration and obligations; incorporation does not eliminate every personal liability or automatically reduce taxes.
Compare responsibilities, not just the label
List the contracts, borrowing and risks of your activity. A corporation requires records and filings in addition to operational tasks. Directors have duties, and personal guarantees remain relevant.
A business-name registration is not incorporation. Registering a shop name does not itself create a separate company. If two people own the activity, review partnership or corporation options rather than treating it as a one-owner proprietorship.
Plan the transition if the business grows
Ask a qualified adviser to compare total costs for your circumstances instead of relying on a universal revenue threshold. Ownership transfers, assets and contracts need attention when an existing activity moves to a corporation.
The CRA says incorporating an existing business requires a new corporation and generally a new business number. Do not assume old program accounts simply move across. Prepare a transition checklist before changing invoices.
Compare the records you will need to maintain
Prepare two lists before choosing a structure: records needed to run the activity and records needed because of its legal form. Customer orders and expenses belong on the first list. Corporate articles, shareholder records and registry filings belong on the corporation’s second list. This separates operational work from the administration that comes with a separate legal entity.
The CRA distinguishes the individual who owns a sole proprietorship from a corporation that can own property and enter contracts in its own name. Use that distinction to frame questions for an adviser: who will contract, who will own the equipment, and how will the records show those decisions?
Build a record map when incorporating an existing activity
Create a transition sheet with the old legal name and BN, the new corporation name and identifier, the new BN, and each program account that needs attention. CRA guidance says old GST/HST and payroll accounts are not automatically associated with the new BN. Follow its process rather than merely replacing the name in an invoice template.
Example
Illustrative example: the same brand, a new legal entity
A designer incorporates but keeps the same website and shop name. A client looking only at the brand may miss the change. Before the next engagement, the designer can assemble the new registry details and ask an adviser how to update contracts, billing and accounts. A familiar storefront name alone does not identify which entity is supplying the next project.
Sources and review
Content updated October 30, 2026. Source checked October 30, 2026. Examples illustrate the process; they do not describe a real corporation.