The licence attaches to the operator, not the business
Under the Child Care and Early Years Act, a child care licence names a specific operator and is not transferable. Incorporate after you are licensed and the new corporation is a new operator: it needs its own licence application to the Ministry of Education, with the review timeline that implies, while funding agreements with your service system manager get re-papered to the new entity. None of that is fatal, but all of it is avoidable, which is why the structure question belongs before the licence application, at the point where changing your mind costs a form instead of a process.
The real fork: ONCA nonprofit or OBCA corporation
Childcare is one of the few industries where incorporation is a genuine two-path choice. A corporation under Ontario's Not-for-Profit Corporations Act has members and a board instead of shareholders; surpluses stay in the organization, income tax generally does not apply, and the governance is real work rather than paperwork. A share corporation under the Business Corporations Act has owners: profit can leave as dividends, the small-business rate of about 12.2% applies to the first $500,000, and the shares are an asset that can one day be sold.
| Question | ONCA nonprofit | OBCA corporation |
|---|---|---|
| Who controls it | Members electing a board | Shareholders |
| Where surpluses go | Retained for the mandate; no dividends exist | Retained, or paid to owners |
| Income tax | Generally exempt; still files a T2 and often a T1044 | About 12.2% on the first $500,000 |
| On exit | Nothing to sell; assets stay in the sector | Share sale possible, potentially using the $1.25M lifetime capital gains exemption |
Funding priorities are set by the province and administered by service system managers, and expansion directions have at times favoured not-for-profit growth. That is a factor, not a verdict. The deeper question is whether you are building an owned business or a community organization, because the two structures answer to different people, permanently.
What the corporation changes for a for-profit centre
Liability comes first in this industry, and honestly: insurance is the first wall when something happens to a child in your care, and no structure replaces it. The corporation adds a second, structural layer by holding the lease, the equipment loans, the employment contracts and the funding agreement at the company level instead of on your personal balance sheet. The tax layer is the familiar deferral, profit retained inside the corporation taxed around 12.2% instead of at personal rates, which funds the next room's buildout faster. The setup itself is unusual in one pleasant way: an exempt service means there is normally no HST account to open at all, just corporate tax and payroll, plus Employer Health Tax registration when the wage bill warrants it. One duty does not soften either way: unremitted payroll source deductions can follow directors personally, so the remittance calendar stays sacred whichever structure you pick.
Moving an existing daycare into a corporation
A running centre can usually roll its equipment, leaseholds and goodwill into a new corporation tax-deferred under a section 85 election, so the move itself does not trigger tax. The choreography around it is the real work: the new licence application sequenced so there is no gap in authority to operate, parent agreements and pre-authorized payments moved to the new entity, deposits carried over as the liabilities they are, payroll cut over on one clean date, and the purchase-of-service and CWELCC agreements re-signed with the municipality. That sequence is the heart of our Incorporation engagement for licensed operators, and where the change is part of a bigger reshuffle, Corporate Restructuring picks up the rest.
When waiting is the better structure
A home daycare running at the scale of one adult and a licensed handful of children rarely needs a corporation yet. If everything the business earns is what the household lives on, the deferral that justifies incorporating never happens, and the T2, minute book and separate accounts arrive as pure overhead. Stay a sole proprietor, keep receipts clean for the parents' T778 claims, and lean on CPA Quick Support at $99 a month for the questions in between. Put incorporation on a trigger instead of a wish: a second location, employees, an offer to buy the operation, or two households running one centre and needing a cleaner way to split what it earns. When the trigger fires, we scope the whole move in writing after a free 15-minute discovery call, anywhere in Mississauga and the GTA.
