If you’re starting a one-person handyman business, one of the first big decisions you’ll have to make is how to set it up legally. Do you keep it simple and run as a Sole Proprietor, or do you go all-in and register as a Corporation?
Both options have pros and cons, and the right choice depends on how you want to run your business. But since I know you just want the answer, likely a corporation is your best bet for keeping you out of legal trouble, but let’s dive in.
Since I know a lot of you are in Canada, the U.S., or somewhere else in the Western world, I’ll break this down in a way that makes sense no matter where you’re working.
Sole Proprietorship: The Simple, No-Frills Option
If you just want to get out there and start making money ASAP, a sole proprietorship is the easiest way to go. There’s basically no setup beyond registering your business name (if you don’t want to use your real name) and getting any required licenses. In the US, you can legally work on small projects below a certain dollar amount, but once you hit that cap, you’ll need a contractor’s license for each type of project you want to take on. In Canada, we don’t have these kinds of restrictions, but in both countries, permitting and bylaws still apply to the work you do.
Why It’s Great:
✔ Easy to Start & Cheap: Just register your business (if needed), and you’re good to go. No crazy paperwork, no expensive fees.
✔ Full Control: You’re the boss, no one to answer to. Every dollar you make is yours.
✔ Simple Taxes: You report your earnings as personal income, so no separate tax filings for your business.
Why It Might Suck:
✖ Unlimited Liability: If something goes wrong (like a lawsuit or debt), your personal assets (house, savings, etc.) could be on the line.
✖ Higher Taxes as You Grow: You start off paying personal tax rates, which are fine at first. But once you make more, those taxes add up fast.
✖ Harder to Get Loans: Banks and investors prefer lending to corporations, so funding your business might be tougher.
Want a deeper dive? Check out Canada Life’s guide or this U.S. Chamber of Commerce breakdown.
Corporation: More Protection, More Paperwork
If you’re thinking long-term, or you want to separate yourself from your business legally, incorporating might be a smarter move. This makes your business its own legal entity, which comes with some perks (and extra responsibilities).
Why It’s Great:
✔ Limited Liability: If your business gets sued or goes into debt, your personal assets are usually protected.
✔ Lower Tax Rates (Maybe): Corporations pay different tax rates than individuals, which can mean savings if you reinvest money into your business.
✔ Looks More Legit: Clients, banks, and suppliers tend to take incorporated businesses more seriously. You might find it easier to get financing or contracts.
Why It Might Suck:
✖ More Complicated & Expensive: Incorporation costs money, and you’ll have ongoing legal and accounting requirements.
✖ Paperwork Overload: You’ll need to file separate tax returns, keep corporate records, and follow stricter regulations.
✖ Potential Double Taxation: If you take money out as dividends, you could be taxed twice—once at the corporate level and again on your personal return (though there are ways to manage this).
For more on incorporating, check out Small Business BC’s guide or the U.S. Small Business Administration.
So, Which One Should You Pick?
- If you just want to get started fast, keep things simple, and don’t expect major legal risks, go sole proprietor.
- If you want legal protection, tax flexibility, or plan to scale up, incorporation might be the better move.
As far as what I do in my business, I set it up as a corporation from the get go to keep me safe and sane. My family has always been heavily involved in business and this was the first piece of advice they gave me: set you business up as a corp. That said, there’s no one-size-fits-all answer, so it depends on your long-term goals. Keep in mind too, that going from a sole prop to a corp isn’t all that difficult, so you can make the choice later if it suits you better. If you’re unsure, talk to an accountant or business lawyer before deciding. Yeah, I know, it’s an expense, but it’s way cheaper than fixing a major tax or legal mess later.
Got questions? Drop a comment below—let’s talk about it!
