Incorporating a painting business: liability, WSIB, and paying crews properly

The liability case in a low-capital trade

Painting needs little equipment, so liability — not asset protection for machinery — is the real reason to incorporate. The claims that hurt are rarely about paint: overspray drifting across a parking lot of cars, a ladder or scaffold incident involving the public, water and floor damage inside an occupied home, or a commercial repaint that fails and must be redone at your cost. Any one of these can exceed what a small contractor earns in a year.

The corporation confines those claims to business assets, with your commercial general liability policy responding first. It is not absolute: suppliers will still take personal guarantees on trade accounts for a while, and directors remain personally liable for unremitted HST and payroll source deductions. But the difference between a corporate judgment and a personal one is the difference between a bad year and a lost house.

WSIB registers the corporation — and probably covers you too

Painting is construction work, and WSIB coverage in Ontario construction is compulsory — incorporating does not opt you out. The corporation registers as the employer, premiums run on the same payroll as before, and general contractors will not let your crew on site without a valid clearance certificate in the corporate name. Two narrow exceptions matter:

• One executive officer of the corporation can be exempted, but only if that person does no construction work — an owner who still picks up a roller does not qualify.
• The home-renovation exemption applies only when you are hired directly by the occupant of a private residence. The moment you work for a builder, GC, or property manager, full coverage rules apply.

Budget premiums as a permanent line in every quote. Treating WSIB as optional is the most expensive habit we see incorporated painters carry over from their sole-proprietor years.

The corporation does not decide who is an employee

Paying painters piece-rate and calling them subcontractors is common in this trade — and incorporation changes nothing about whether that holds up. CRA and WSIB apply the same control, tools, and integration tests to your corporation that they applied to you personally. A reclassification means retroactive CPP, EI, and WSIB premiums plus penalties, all landing on the company at once.

If your subs are genuine, treat them that way on paper: their own corporations or registered businesses, their own WSIB clearances, their own insurance certificates, and T5018 slips filed for what you pay them. If they are actually your crew, put them on payroll — the mechanics are covered on our painting contractor payroll page.

When the corporation pays for itself

The honest threshold: if you spend every dollar the business makes, the deferral is worth little and liability is the whole case. Once winter interior work and spring exterior season leave real profit behind — or a commercial contract asks for higher insurance limits and a clearance — the corporation earns its keep. It also opens the salary-versus-dividend choice, which matters most in the years the company finances a van or an airless sprayer and you want compensation shaped around cash flow rather than habit.

Franchises, and setting up in the right order

Franchise painting systems generally require a corporation before signing, and the franchise adds its own accounting wrinkle: royalty and marketing-fund payments flowing to a US franchisor raise withholding questions we cover on our cross-border tax page for painting contractors. Independent or franchised, the setup order is the same: incorporate with more than one share class, open the RC, RT, and RP accounts, register WSIB and move insurance into the corporate name before the first corporate invoice, then keep the entity current through ongoing compliance. Doing these out of order — invoicing through a corporation that has no WSIB account — is how new corporations meet their first auditor.

Source: Workplace Safety and Insurance Board (WSIB) — construction industry coverage.