business registration vs company incorporation

One of the most frequently asked questions of new entrepreneurs is ‘What the difference is between a Master Business Licence and an Incorporated company?’. Starting a new business can be an overwhelming endeavour, but Ontario Business Central is here to help you understand the process of registering your new business.

Here are the few key differences between a Master Business Licence and Incorporation, to help you determine which is best suited to your needs.

Limited Personal Liability

The type of business you register will determine the risk of your personal liability, should there be any personal or property loss due to your business’ actions.

The Master Business Licence, does not provide any separation between you as an individual and your business. This means that you are personally liable for any personal or property loss that occurs due to your business.

With an Incorporated company, the business itself is a separate entity from you and has its own liability risk separate from you as an individual.

Name Protection

A Master Business Licence, whether a sole proprietorship, general partnership or tradename under an existing corporation, does NOT have name protection. So, if another business chooses to operate under the same name or a similar name to your business name, they can do so with no opportunity for you to seek infringement.

With an incorporated company, you do have name protection for the exact business name you’re registered under. The system will not allow someone to incorporate with the exact same business name within the jurisdiction you’re registered in, whether Federal or Provincial. If someone incorporates or registers a business name that is similar after you have incorporated, you may be able to seek infringement, requesting that the new business change its business name or face litigation. If this occurs, it is always beneficial to obtain an opinion from a lawyer on infringement.

Tax Advantages

A Master Business Licence is taxed at a personal level. When you register a Master Business Licence, the business is automatically considered part of your personal tax account.

With an incorporated company, because the corporation is a separate entity from you as an individual, the corporation has its own tax account separate from yours. This requires you to complete both a personal and corporate tax return each year. With an incorporated business, if you are able to keep money within the corporation instead of transferring the funds to your personal account, there may be tax savings as corporations are typically taxed at a lower tax rate. There is also the availability for income splitting with members of your household who earn less money, investing, gaining credit/loans, providing a pension to yourself as a director of a corporation and many other options.

Length of registration

When you set up a Master Business Licence, it is valid for a 5 year period. Once the 5-year mark arrives, you must renew the business for an additional 5 years or the registration will automatically be cancelled by the Province of Ontario.

An incorporated company is continual. Once you set up the corporation, you never have to pay the fees to incorporate again or renew the corporation.

Changing information

The Master Business Licence is limited as to the changes you can make without requiring a new registration. You can change business address, persons address or business activity, as well as being able to add or remove partners in a General Partnership, as long as the registration remains a partnership. The items you cannot change are the business name, changing the registration from one person to another or switching from a sole proprietorship to a general partnership or vice versa.

With an incorporated company, you have the availability to make any change to the corporation you wish including business name, directors listed, addresses, structure, and activity of the corporation.

Costs

The fees to register a Master Business Licence are typically a few hundred dollars less than with incorporation. However, you are required to renew the registration every 5 years.

With the incorporation, there are no renewal fees or incorporation fees required after the original process of establishing the corporation.

Master Business Licence

Ontario Incorporation

Federal Incorporation

 

If you require assistance with searching a business name and confirming if that business name appears to be available within the jurisdiction you wish to operate, please feel free to reach out to us for services related to searching and gaining approval towards registration or incorporation.

inquiries@ontariobusinesscentral.ca
Toll-Free: 1-877-306-9458
Local: 1-416-599-9009
Fax: 1-866-294-4363
Office Hours: 9:00am – 5:00pm
Monday – Friday E.S.T.

Ontario Business Central Inc. is not a law firm and cannot provide a legal opinion or advice. This information is to assist you in understanding the requirements of registration within the chosen jurisdiction. It is always recommended, when you have legal or accounting questions that you speak to a qualified professional.