Choosing the Right Business Structure in Ontario

A guide to help entrepreneurs decide between sole proprietorships, partnerships, corporations, and cooperatives.

Registering A Business In Canada Is Easy, Get It Done In 10 Minutes

Starting a business in Ontario or anywhere in Canada is easier than you think—some registrations take less than 10 minutes. Depending on the structure you choose, registration might even be free when operating under your legal name.

Which Business Structure in Canada Works For You?

Choosing a business structure in Canada is crucial to how you want to operate your enterprise. You can avoid start-up fees when you run the business under your legal name with no team, establishments or headquarters.

Case Study: Client Question

Hi, my name is John Wayne and I offer hairstyling services from home or on the go. I want to operate under my full legal name. How much does it cost to register my business in Ontario? Can you help me?

Case Study: KBS Consultant Response

Hi John! Congratulations on starting your entrepreneurial journey. Offering mobile hairstyling is a great service, and clients love convenience! To your question: if you’re using your full legal name as your business name, there’s no requirement to register, and therefore no cost. This is considered a sole proprietorship under Ontario law. However, keep in mind that while this option is free and simple, it doesn’t provide liability protection. If a client ever files a complaint or legal claim, your personal assets could be at risk. Would you like to chat about registration options that offer more protection and brand flexibility?

Types of Business Ownership in Canada 

There are four types of legal structures for Canadian entrepreneurs. You can operate a sole proprietorship, partnership, corporation, or cooperative. These structures have good and bad benefits; it’s not a one-size-fits-all solution—it’s which structure is best for you! Let’s see which one makes the most sense for you.

1. Sole Proprietorship

Sole Proprietorship is the most common structure and helps you save more in start-up fees and taxes. You do not need to register your business if you are using your legal name as your business name. Though you start as a sole proprietorship, you can later change your business structure to one of the others.

Advantages

• Full control over decisions

• Low start-up costs

• Easy tax filing (income claimed on personal tax)

• All profits go to you

Disadvantages

• No legal separation from business

• Personal liability for debts

• No business name protection

• Personal income tax applies

2. Partnership

Partnerships are owned by two or more people who manage the everyday operations. This is great for sharing costs, income, losses, and debts. Is this the right option for you?

Advantages

• Shared start-up costs and responsibilities

• Easy to establish and operate

• Diverse skills and input from partners

• Business income and losses claimed on personal tax returns

Disadvantages

• Each partner is liable for business debts and actions of the other

• Disagreements may arise if roles aren’t clearly defined

• Shared decision-making may slow down operations

• Potential complications if a partner exits the business

3. Corporations

Corporations are legal entities that separate the business from the owner. When incorporating, you’ll have the option to decide whether you want to do so federally or provincially. Both of them hold their benefits. Registering provincially leaves room to change to a federally incorporated business later, which requires additional filing. The good news is that both can be done together when registering a corporation in Ontario.

Book a consultation to discuss incorporating your business in Canada. Click here.

Advantages

• Limited liability for shareholders

• Easier access to capital and government grants

• Ownership is transferable through shares

• Better credibility and name protection (especially federally)

Disadvantages

• Higher start-up and ongoing administrative costs

• More complex tax filing and record-keeping

• Information is public (officers, filings, etc.)

• Corporate income taxed separately from personal income

Corporations often have better access to business grants, can benefit from small business tax deductions, and offer greater credibility when working with clients or funders.

4. Cooperatives

Cooperatives are democratically controlled corporations. Normally organized and controlled by their members. Starting a cooperative in Canada can be a for-profit or a not-for-profit, and you can have it registered provincially or federally. 

Advantages

• Democratic decision-making (one member, one vote)

• Limited liability for members

• Can be eligible for grants or nonprofit exemptions

• Members benefit from profits and services

Disadvantages

• Slower decision-making due to group consensus

• Requires active participation from all members

• Complex to set up and manage

• Not ideal for entrepreneurs who prefer full control

Choosing the right business structure in Ontario or across Canada depends on your goals, operations, and level of risk you're willing to take. Not sure where to start? Book a consultation for one-on-one guidance on registering your business.

5 Frequently Asked Business Registration Questions (FAQ)

1. Do I need to register my sole proprietorship in Ontario?

If you're using your legal name as your business name and not hiring employees or opening a location, you may not need to register. However, registration is required if you operate under a different name.

2. What is the cheapest business structure to start in Canada?

A sole proprietorship is typically the most affordable and simplest to start, especially if you use your legal name and work independently.

3. Can I switch business structures later?

Yes. Many entrepreneurs start as sole proprietors or partners and later incorporate as their business grows or risks increase.

4. What’s the difference between federal and provincial incorporation?

Federal incorporation gives you name protection across Canada and is ideal for businesses operating nationally. Provincial incorporation is limited to the province where you register but is simpler and often more affordable initially.

5. What’s the best structure for nonprofits or community-based businesses?

Cooperatives and not-for-profit corporations are often best suited for organizations focused on community ownership, shared benefit, or social impact.