Incorporating your trades company: licences, liability, and who gets shares

The licence question comes first

Ontario licenses the business and the person separately, and the corporation only works if both layers line up. Your Certificate of Qualification from Skilled Trades Ontario is personal — it never moves into the company — but the contractor-level licence sits with the corporation and must be qualified by a named individual.

The planning point: if you are the qualifier, the company cannot legally operate without you. That shapes key-person insurance, your shareholder agreement, and any sale — a buyer without their own qualifier needs you, or your master licence, through a transition. Build that into the paperwork on day one, not during due diligence.

Liability: why a service fleet should not run on a T2125

A trades business carries risk that compounds with every hire. An apprentice's mistake behind a wall, a furnace installed by a tech having a bad day, three vans in traffic every day — as a sole proprietor, every one of those is a personal claim against you. The corporation confines those claims to the business, with insurance in front and the corporate wall behind.

The tax deferral then does quiet work in a capital-hungry trade. Profit kept in the company is taxed around 12.2% in Ontario, and the difference against your personal rate buys the next van, the pipe threader, or winter payroll for the install crew. Staying a sole proprietor is defensible only while you are part-time, employee-free, and lightly equipped. Note what incorporation does not remove: WSIB premiums, ESA obligations to your apprentices, and HST on your invoices all continue — and US parts and equipment purchases add an import layer we cover on our cross-border tax page for the trades.

Family shareholders without the TOSI trap

Put the share classes in the articles now; decide who uses them later. A proper trades incorporation includes separate classes of shares so a spouse or adult child can hold non-voting shares, but the tax on split income (TOSI) rules decide whether dividends to them are worth paying. The clean path is genuine work: a family member who averages 20 hours a week in the business — dispatching, invoicing, running a crew — is generally outside TOSI and can be paid dividends at their own rates.

A spouse who does not work in the business usually cannot be dividend-paid tax-effectively until you are 65. Trades companies rarely fit TOSI's other exceptions because service revenue dominates. The mistake we fix most often is the reverse: a bargain incorporation with one share class, followed by a paid reorganization the year the family wants dividends. The share structure costs nothing extra at the start and thousands to retrofit.

Buying a book of business through the corporation

When a competitor retires, buy their customer list inside your corporation, not personally. The corporation repays acquisition debt with dollars taxed at 12.2%, while you would repay a personal loan with dollars taxed at your marginal rate — on a maintenance-contract book that difference often decides whether the deal works. The purchase price for the list and goodwill lands in Class 14.1 and is deducted over time at 5% declining balance.

Structure the asset purchase carefully: if you acquire all or substantially all of the seller's business assets, a joint GST/HST section 167 election can remove tax from the purchase price entirely. Diligence the book like a tradesperson — warranty tails on past installs, prepaid service agreements you must honour, and which techs come with the customers. We model the deal, set up the election, and fold the new revenue into your books; if the headcount jumps, our trades payroll page covers apprentices, WSIB, and crew onboarding.

Day-one checklist for a trades corporation

• Incorporate with multiple share classes and a minute book that will survive a lender's or buyer's review.
• Requalify the licences — ECRA/ESA, TSSA, or municipal — in the corporation's name before invoicing through it.
• Open RC, RT, and RP accounts; register for HST immediately so input tax credits on vehicles, tools, and parts are never stranded.
• Move insurance and WSIB to the corporate name the same week, and keep the annual returns current through ongoing compliance.

Source: Electrical Safety Authority (ESA).