The company should be the borrower from machine one
Equipment lenders and machine-tool vendor finance programs write their paper to a legal entity, and whichever entity signs the first loan is the one that builds a credit file. Incorporate first and every payment the shop makes adds to the corporation's borrowing history; stay a sole proprietor and the debt, the guarantee and the exposure all remain personal, with nothing accumulating that a future credit committee can read.
Personal guarantees will still appear on early loans; that is normal. What changes is the trajectory: two or three years of clean corporate statements give you something to negotiate with at every renewal, so guarantees that began at full coverage get capped and eventually shed. Walla Assaf spent years on the banking side before founding Tauro, and that negotiation is familiar ground.
Your parts fail inside other people's products
A job shop's liability is downstream: the pin, housing or shaft you machined sits inside a customer's assembly, and if it is blamed when that assembly fails, the claim lands on whoever accepted the purchase order. OEM purchase orders carry quality clauses, chargeback rights and indemnities, and a sole proprietor signs all of that personally, house attached. A corporation takes the signature instead and puts a limited-liability layer between a warranty dispute and your family's assets.
The corporation does not replace commercial general liability insurance or the inspection discipline that stops the claim from existing. It is the layer underneath both, and the cheapest of the three.
There is an administrative version of the same argument. OEMs onboard suppliers into approved-vendor systems under one legal name, with insurance certificates and quality flow-downs attached; switch entities later and you are a new vendor, re-qualified from scratch, sometimes with the supplier audit repeated. Signing as the corporation from the first purchase order avoids that re-papering entirely.
What belongs in whose name
Structure questions in a machine shop are really asset-placement questions, and the map is cheaper to draw early than to redraw later:
| Asset | Where it usually belongs |
|---|---|
| Machines, jobs, staff and OEM contracts | The operating corporation, always |
| The shop building, if you buy it | Often a separate corporation renting to the shop, keeping the property clear of operating risk and letting a buyer one day take the operation without the real estate |
| The fund for the next machine | Deliberately placed; where it sits can move the small business limit |
| Your house and personal savings | Outside all of it, which is the point of the exercise |
Not every shop needs the two-corporation version on day one; a single clean operating company is a fine start. What matters is share classes drawn wide enough at incorporation that a holding company or family shareholders can be added later without dismantling anything, and the machine-fund question then becomes live work for Tax Planning & Advisory.
Machinists retire, and shops get bought
Precision shops change hands: to a senior machinist buying in, to a competitor consolidating capacity, to a buyer who wants the certifications and the customer list. If the shares qualify as qualified small business corporation shares at that moment, each shareholder can shelter up to $1.25 million of gain under the lifetime capital gains exemption, a test that rewards a corporation kept clear of surplus passive assets and shares held at least 24 months. We set the share structure up for that ending at the beginning.
Already running as a sole proprietorship with machines on the floor? A section 85 rollover usually moves the equipment and goodwill into the new corporation tax-deferred, though financed machines need the lender's consent to transfer, one more reason to incorporate before the next purchase rather than after. Our Incorporation service handles the corporation, minute book, CRA accounts and HST registration in one pass. Registering for HST voluntarily matters even before the first invoice, because a shop's build-out is mostly taxable purchases, compressors, tooling packages, coolant systems, and the 13% on each of them only comes back to a registrant. The payroll account opens at the same time, so the first machinist's source deductions and WSIB coverage have somewhere to land from day one. The work is quoted in writing after a free 15-minute discovery call, for shops across Mississauga and the GTA, and the lender package for the first corporate machine loan can follow through Business Financing Advisory.
