Incorporating a dealership: OMVIC, floorplan, and the buy-sell down the road

OMVIC registers the dealership — make that the corporation

Under Ontario's Motor Vehicle Dealers Act, the dealer registration belongs to the business that buys and sells vehicles, while every salesperson holds an individual registration alongside it. Register the corporation as the dealer from day one and the licence never has to move; start as a sole proprietor and incorporate later, and you are effectively bringing a new legal person to OMVIC while the old registration winds down.

OMVIC looks through the corporation at the people behind it — officers, directors, and significant shareholders are disclosed and assessed, and changes in that group must be reported. That matters for planning: adding a partner, bringing family onto the share register, or selling control is a regulatory event, not just a corporate one. We sequence share changes so the OMVIC file, the minute book, and the CRA accounts all tell the same story.

Floorplan lenders are underwriting your corporation

Inventory financing is the bloodstream of a dealership, and floorplan lenders lend to corporations with clean records — a meaningful floorplan facility for a sole proprietorship is close to nonexistent. Expect the lender to take a general security agreement over inventory and much of everything else, to require personal guarantees from the principals, and to show up for periodic inventory audits where every VIN on the line had better be on the lot or accounted for.

The corporation's books are part of the covenant package. Lenders want statements on time, curtailment schedules honoured as units age, and payouts remitted the moment a financed vehicle sells — selling a unit and slow-walking the payout is the cardinal sin of floorplan. F&I income from financing reserve and warranty products belongs in the same entity, cleanly separated in the ledger, because the lender reads margins by department. A corporation with tidy records does not just save tax; it keeps the credit line open.

Dealer buy-sells: shares or assets

Almost every dealership changes hands eventually, and the structure question splits on whether a manufacturer sits above the store. Franchised stores often trade as share deals because the dealer agreement lives inside the corporation; used-car independents usually trade as asset deals.

The seller's exemption and the buyer's clean slate pull in opposite directions, which is why dealer buy-sells price the structure, not just the store. If a sale is even five years out, keeping the corporation's assets clean enough to qualify for the exemption is planning worth starting now.

Where the profit and the property should live

A profitable store accumulates cash, and cash sitting in the operating company sits behind the floorplan lender's security. A holding company above the dealership can receive surplus as tax-free intercorporate dividends and hold it beyond the reach of operating creditors — but move money with your facility's covenants in view, since lenders restrict distributions for a reason. The lot and building, where owned, usually belong in a separate real estate company charging the dealership rent. Both layers add annual T2 filings, and the associated group splits a single small business limit, so we build them when the balance sheet justifies them, not by default.

Set the share structure with the same horizon. Articles with multiple share classes cost nothing extra at incorporation and make room for a spouse or adult child later — remembering that the tax on split income rules only reward family members who genuinely work in the store, and that every shareholder change lands on the OMVIC file. A dealership drafted for one owner and one share class gets rebuilt, at legal rates, the year any of this becomes relevant.

Dealers who buy at US auctions or run USD floorplan carry an extra set of questions — import paperwork, currency exposure, and border GST — covered on our cross-border tax page for car dealerships.

Source: Ontario Motor Vehicle Industry Council (OMVIC).