Three shapes, and what each one protects
A first franchise almost always starts as a single Ontario corporation, and for one location that is usually right: one T2, one HST account, one payroll account, and profit taxed at the roughly 12.2 percent combined small-business rate. The structure question turns real at unit two, because the second location either joins that corporation or gets one of its own, and the two paths protect different things.
One corporation holding every unit is the cheapest to run, but every unit shares one balance sheet. A kitchen-fire claim, a lease default or a failing location has a direct line to the equity the strong store built. A corporation per unit puts walls between locations and makes an eventual exit cleaner, because a buyer can take one unit's shares without touching the rest. The cost is real: a minute book, a T2 and CRA accounts for every corporation, and no extra tax room, since associated corporations share a single $500,000 small-business limit no matter how many of them exist.
The third shape adds a holding company above the operating corporations. Profit moves up as generally tax-free intercorporate dividends, so the cash earmarked for unit three sits away from unit one's risks and can be loaned back down, secured, when a build-out needs it. Keeping surplus out of the operating companies also matters if a unit sale is ever meant to use the $1.25 million lifetime capital gains exemption, a test that idle cash inside an opco can spoil.
The franchisor holds a veto, so sequence matters
Nearly every franchise agreement restricts assignment, and moving the agreement from you personally into a corporation, or between two corporations you own, is an assignment. That means written franchisor consent, often a transfer fee, and always delay. The clean order is to incorporate first and sign in the corporation's name from day one, so the licensed entity never has to change.
Expect the brand to shape the structure itself. Many franchisors require a single-purpose corporation per agreement, insist the operating principal keep a minimum stake, approve every shareholder, and take personal guarantees from the principals regardless of how many corporations stand in between. Be honest about what that guarantee means: corporate walls protect you from trade creditors, lawsuits and one unit's collapse, not from the bank you signed for.
Naming follows the same logic. The brand name is the franchisor's trademark, licensed to you rather than owned by you, so the corporation is typically a numbered company or a neutral name of your own, registered to operate under the brand exactly as far as the agreement permits.
What a lender reads in your structure
Credit departments like a single-purpose borrower: one corporation, one location, statements that show that unit without three others blended in. A corp-per-unit structure gives the next build its own borrower and keeps the new loan's covenants off the units already running, although guarantees across the group are usually requested. Put everything in one corporation instead and every lender's covenants sit on the whole business at once, so one soft unit can trip terms the others were meeting. Walla Assaf spent years in banking and corporate finance before founding Tauro, and the structures we set up are ones we know a credit desk will read the way you need them read.
Shares for the family, drawn once
Articles of incorporation are the cheapest place to build flexibility and the most expensive place to fix later. If a spouse or adult child may ever hold shares, we create the classes now. Where family dividends are the long-term goal, the shares should carry a genuine 10 percent of votes and value so the TOSI excluded-shares test stays open, planning we go deep on in Tax Planning & Advisory; at incorporation the job is simply not to close that door. The franchisor's veto reaches here too, since most brands must approve who holds the franchisee corporation's shares. Where the horizon is succession, Estate Planning belongs in the same conversation.
Set up once, in the right order
| Structure | Best for | Watch for |
|---|---|---|
| One corporation, all units | A first unit and lean compliance costs | Every location shares one balance sheet and one set of risks |
| Corporation per unit | Liability walls and a clean single-unit sale | A T2 and minute book per corp; one shared $500,000 limit |
| Opcos under a holding company | Multi-unit owners banking expansion cash | Setup and annual cost; earns its keep once surplus builds |
Our Incorporation service runs the whole sequence: the corporation with the right share classes in the articles, business-name registration, CRA program accounts, and a minute book a franchisor's lawyer can review without questions. We work with franchisees across Mississauga and the GTA, and the fee is quoted in writing after a free 15-minute discovery call.
Already trading through a structure that no longer fits? Corporate Restructuring can rebuild it, usually with a tax-deferred rollover and always with the franchisor's consent, which is exactly why getting the shape right the first time is the cheaper path.
