Sole Proprietorship
Pros: Simplest and least expensive to set up. Detailed regulatory burden is low.
Cons: Unlimited personal liability. Business income is taxed at your personal marginal tax rate.
Tax Filing: T1 Personal Tax Return (Form T2125).
Corporation
Pros: Separate legal entity, limited liability protection, potential access to the Small Business Deduction (lower tax rate ~12.2% in Ontario for eligible income), income splitting opportunities.
Cons: More expensive to set up and maintain. Requires separate T2 Corporate Tax Return, minute books, and annual resolutions.
Official Resource: Sole proprietorships (CRA)
Official Resource: Incorporating a business
