One customer, your rig, their schedule
Incorporation only delivers its tax rate if a business genuinely exists inside the corporation. A welder whose rig sits in the same contractor's yard five days a week, billing straight hours on that contractor's schedule, risks being a personal services business: a corporation earning what is really employment income. PSB status strips the small business deduction, cuts deductions back to little more than the salary actually paid out, and lands a combined corporate rate around 44.5% in Ontario, worse than simply being on the payroll.
The test is what the relationship would look like without the corporation in between, and it is built from facts a rig owner can steer: a second and third customer on the books, counter repair work between contracts, your own consumables burning even on their site, and scopes quoted rather than shifts filled.
| What CRA weighs | Reads as a business | Reads as an incorporated employee |
|---|---|---|
| Customers | Several contractors and shops through the year | One payer, month after month |
| Equipment | Your rig, your gas, your consumables | Their machine and their wire |
| Pricing | Quoted per job or per call, rework on your dime | Straight hourly on their schedule |
| Substitution | You can send another qualified welder | They hired you personally |
No single row decides it; the pattern does. We review that pattern before the articles are filed, because PSB exposure is cheap to prevent and expensive to argue.
What the wall is worth in hot work
Welding liability has a long tail: sparks near someone else's stock, a customer's equipment sitting in your shop, a structural weld questioned years after the job shipped. Insurance answers first, and the corporation is the second line, holding claims beyond policy limits, the shop lease and supplier balances away from the house. Personal guarantees a landlord or equipment lender takes still bind you personally, so we keep them narrow, capped and dated.
The rate case runs beside the risk case. Profit kept inside is taxed at roughly 12.2% on the first $500,000 and funds the next machine, and a future sale of qualifying shares can shelter up to $1.25 million of gain per shareholder under the lifetime capital gains exemption, an exit no sole proprietorship offers.
Paper that must name the corporation before the switch
A fab shop cannot simply start invoicing from a numbered company on Monday. Three files have to carry the new name before certified or site work continues:
- The CWB certificate: certification attaches to the legal entity that holds it, not to you personally, so the corporation needs the certificate in its own name before it signs work that must come from a certified company. Your welders' qualifications ride under whichever certificate is current.
- WSIB: the corporation opens its own account, and the clearance certificates general contractors demand before the rig rolls onto site must show the new entity. Ontario's compulsory construction coverage reaches executive officers too, with a narrow exemption for one officer who stays off the tools.
- HST and the asset move: the corporation registers fresh, a joint election on form GST44 keeps 13% off the transfer of the business's assets, and a section 85 rollover moves the rig truck, positioners, steel stock and goodwill in at elected amounts that defer the income tax.
Sequenced properly, the customer never notices the switch; sequenced badly, a certified bid or a site clearance stalls while the paperwork catches up.
Shares set before the first family dividend
TOSI taxes dividends to family members at top rates unless an exclusion genuinely fits, and the realistic route in a fab shop is a spouse who actually works in the business, on dispatch, quoting or the books, averaging 20 hours a week. Share classes that leave room for that, and for the capital gains exemption at a sale, cost nothing extra to draft on day one and real money to retrofit later.
Walla Assaf's corporate structuring background designs the classes, and our Incorporation service files the articles, opens every account and papers the rollover as one engagement, quoted in writing after a free 15-minute discovery call. If an old setup got the shares wrong, Corporate Restructuring repairs them, and the pay decisions that follow the switch live on our welding shop tax planning page. We run this sequence for shops and mobile rigs across Mississauga and the GTA.
