The liability follows the opening, not the invoice
In this trade the risk outlives the job. A flashing detail that lets water in shows itself two winters later; a patio door that drops out of square gets service calls for years; an installer's fall or a shattered sealed unit can turn one afternoon into a claim. As a sole proprietor, every one of those lands on you personally, and so does the obligation to return each deposit you hold if a job cannot proceed. A corporation does not make the risks smaller, but it decides where a claim stops. Insurance stays the first line of defence; the corporate wall stands behind it.
There is a sales angle too. Homeowners handing over a large deposit on a custom order, and financing programs deciding whether to carry your paper, both read an incorporated dealer with clean statements as a safer counterparty than a trade name on a personal chequing account.
The tax case: winter money at the small-business rate
Profit kept in the corporation is taxed at about 12.2% combined in Ontario on the first $500,000 of active income. For a window dealer that matters because the business itself demands retained cash: January payroll when booking is thin, showroom rent, and the working capital gap between paying the manufacturer and installing the order. Funding those from lightly-taxed corporate dollars instead of fully-taxed personal ones is the recurring win, and the deferral only exists once profit reliably exceeds what the household draws.
The long game is the exit. A dealer with a known brand, a showroom and a service book sells better as shares than as used vans, and shares of a qualifying small business corporation can access the $1.25 million lifetime capital gains exemption. Structured early, that is the difference between a taxed asset sale and a largely sheltered share sale.
Incorporating with a live order book
Most guides assume you incorporate a blank slate; a window company incorporates mid-backlog, holding signed contracts and their deposits. Those sold-not-installed orders are assigned to the corporation, which takes over both the obligation to install and the liability to the customer for the deposit, and the corporation's new HST number collects on everything from the switch forward. Hard assets move under a section 85 rollover at elected amounts filed on Form T2057 so the transfer triggers no tax, and a NUANS search protects the name your lawn signs have been building. We time the whole move to the weeks when the backlog is thinnest, for the same reason we point year-ends there.
| What moves to the corporation | How it gets there |
|---|---|
| Sold-not-installed contracts and their deposits | Assigned, with the corporation assuming the install obligation and the deposit liability |
| Manufacturer dealer agreement, rebate tier, co-op account | Re-papered in the corporate name, with tier continuity confirmed before the switch |
| Consumer-financing dealer account | The program re-approves the corporation as dealer of record |
| WSIB coverage for install crews | New account, premiums moved, fresh clearance certificates |
| Vans, tools, displays and inventory | Section 85 rollover at elected amounts, Form T2057 |
| The trade name on the trucks | NUANS search, then registered to the corporation |
One tail does not transfer by default: warranties on jobs you installed as a sole proprietor remain your personal promises unless the corporation formally assumes them. That is a decision to make deliberately, in writing, not an assumption.
When staying simple wins
If every dollar of profit funds the household, the deferral is worth nothing yet and incorporation adds a T2, a minute book and fees. In this trade the deposit and warranty exposure sometimes justifies moving before the pure tax math does, but that is a judgment call about your contracts and your insurance, not a reflex. We give the honest answer at the free 15-minute discovery call, including when the answer is not yet.
Shares that leave room to grow
Day one can be plain: founder common shares, plus a second class so dividends have flexibility later. A spouse's shares only make sense with a TOSI answer first, since dividends to a family member who does not actually work in the business are generally taxed at top rates. Retained earnings and the deposit float can move behind a holding company later through Corporate Restructuring without unwinding anything. Our Incorporation service handles the articles, shares and CRA accounts, then sequences the dealer agreements, WSIB and contract assignments above so no customer, manufacturer or lender ever finds a gap. From there, Tax Planning & Advisory decides what the new structure should actually pay you.
