One corporation or two
Two, in most cases. The holdco owns what appreciates and the opco touches what can go wrong: guests slip, employees sue, franchise agreements get breached, and every one of those claims should land in a company that does not own the building. The lease between the two corporations is the hinge of the structure, moving profit from operations to the property on terms you set, and the rent it carries is treated as active income within the associated group rather than passive rent.
| Piece of the business | Where it lives |
|---|---|
| Land, building and the mortgage | Holdco, insulated from operating claims |
| Franchise agreement and flag obligations | Opco, with the franchisor's consent to the structure |
| Staff, payroll, WSIB and guest contracts | Opco, where the liability already is |
| Furniture, fixtures and equipment | Usually opco, replaced on its cycle |
| The lease between them | The hinge: written, priced and actually followed |
The honest exception is the small end. A modest independent motel with thin equity can live in one corporation for years without much risk; the second company starts paying for itself as equity builds, a flag arrives, or a sale comes into view. What decides the question is rarely the setup cost; it is whether the equity sitting in the building has outgrown the operating risks sleeping beside it.
Buying an existing property: assets, shares, and who signs
Most hotel purchases are asset deals. The buyer gets a fresh CCA base and leaves the vendor's history behind, and the price allocation among land, building, FF&E and goodwill becomes a genuine negotiation, since every dollar shifted to building or equipment is future depreciation for you and recapture for them. On closing, HST on the real property usually moves no cash at all: a registered purchaser self-assesses and typically claims the offsetting credit on the same return, but only if the right corporation exists and is registered before closing. That is the practical reason to incorporate before the offer, not after: the agreement of purchase and sale should be signed by the company that will own the asset, not by you personally with a promise to fix it later. If you already run an unincorporated property, a Section 85 rollover moves it into a corporation without triggering tax on the way in, though Ontario land transfer tax needs its own look.
The flag and the lender will read your structure first
A franchisor licenses the flag to a specific entity and will want covenants, and often personal guarantees, from the principals; the franchise application and the incorporation have to name the same company. The lender reads the structure just as closely: expect a mortgage on the holdco's property, a general security agreement over the opco, guarantees across the group, and an assignment of the lease between the two. Insurance follows the same map: property coverage in the holdco's name, liability and business interruption in the opco's, with the flag's required minimums met on each. A certificate reissued mid-closing because the named insured was wrong is a delay every buyer can skip. Our founder spent a decade in banking and corporate finance before founding the practice, so we build the structure the way the credit file will be read, and our Business Financing Advisory work carries that through the application itself.
Day one, done properly
Our Incorporation service sets up the pieces a hotel needs from the first night:
- Articles with useful share classes, so a future holdco freeze or family dividends do not require amending the corporation mid-flight.
- CRA program accounts from the start: corporate tax, payroll for the housekeeping team, and HST registration immediately, since a hotel passes the small-supplier threshold in its first busy week.
- Municipal Accommodation Tax registration with the local municipality where a MAT bylaw applies, plus WSIB coverage before the first shift is worked.
- The intercompany lease in writing, priced defensibly, because an undocumented lease is the first thing both CRA and a future purchaser's lawyer will ask about.
Structure questions ride along naturally, and where they get deep we bring in Tax Planning & Advisory rather than guessing. The whole setup is quoted in writing after a free 15-minute discovery call, so you know the cost before the deal timeline starts compressing.
