When it starts to pay
The corporation earns its keep the year you stop spending everything the business makes. Profit left inside is taxed at roughly 12.2% on the first $500,000 of active income, so the next van, the winter payroll float and the parts stock get bought with 88-cent dollars instead of the roughly 46-cent dollars a top-bracket sole proprietor keeps.
Liability is the second leg. Gas piping, combustion equipment and refrigerant carry real consequences when something goes wrong, and a corporation keeps a claim that outruns your insurance from reaching the house. Insurance stays the first line of defence; the corporate wall is the second. The third leg sits years away: shares of a qualifying small business corporation can access the $1.25 million lifetime capital gains exemption on a sale, which a sole proprietorship selling assets never gets.
Contracting reality pushes the same direction. Builders and property managers onboard corporate subs more readily, holdback and progress-draw work reads cleaner on corporate paper, and a maintenance-plan book is far easier to sell one day as shares of a company than as a stack of personal contracts needing individual consents.
When it does not pay yet
If every dollar of profit funds the household, the deferral disappears and incorporation mostly adds a T2, a minute book and accounting fees. The honest threshold is sustained profit beyond your draw, or a liability or contracting reason that will not wait. We say so at the free discovery call when that is the answer, and the sole proprietorship keeps its simplicity until the numbers turn.
The transition checklist most guides skip
A corporation is a new legal person, and an HVAC business hands more registrations across than almost any other trade. Timing helps: we run the switch in a shoulder month, when the install board is quiet, rather than mid-January with furnaces down across the city. A NUANS name search protects the trade name your trucks have been advertising for years, and the sole proprietorship winds down with a final T2125 on your last personal return while the corporation starts its first fiscal year on a date chosen on purpose. The sequencing is the job:
- TSSA registration. Fuels-contractor registration belongs to the business, so the corporation needs its own before it touches gas work. Your G2 or 313A certificates stay personal; the registration does not follow you automatically.
- WSIB. A new account, premiums moved over, and clearance certificates re-issued so GC portals show the corporation rather than the person.
- CRA accounts. A fresh business number with GST/HST and payroll accounts; the sole proprietorship's HST number closes with a final return.
- Contracts and plans. Maintenance-plan agreements, manufacturer warranty registrations, supplier accounts and consumer-financing dealer agreements all get assigned or re-papered in the corporate name.
- Trucks and tools. Moved in under a section 85 rollover at elected amounts, filed on Form T2057, so the transfer itself triggers no tax.
Shares on day one, structure for later
Day one can be simple: founder common shares, perhaps a second class for dividend flexibility later. A spouse who genuinely works in the business, dispatching and running the office an average of 20 hours a week, can generally fit TOSI's excluded-business exception; a spouse who does not will usually see dividends taxed at top rates, so family ownership gets planned around the facts rather than the wish. A holding company rarely belongs in year one, but once retained earnings build, Corporate Restructuring can add one without unwinding anything.
Sole proprietor vs corporation, HVAC edition
| Dimension | Sole proprietor | Corporation |
|---|---|---|
| Tax on profit left in the business | Your full personal rate | About 12.2% up to $500,000 |
| A claim from a bad install | Reaches personal assets | Generally stops at the company |
| Builder and GC onboarding | Harder; many prefer corporate subs | Corporate name, WSIB clearance, T5018 continuity |
| Selling one day | Asset sale, no share exemption | Share sale can use the $1.25M LCGE |
| Admin | T1 with a T2125 | T2, minute book, separate accounts |
Our Incorporation service handles the articles, share structure and CRA accounts, then sequences the trade-specific handoffs above so the licences never lapse and no GC finds a gap in your clearances. Not there yet? A one-truck operator can keep CPA Quick Support at $99 a month and ask the incorporation question the month it becomes real.
