Incorporate · By Industry
Often not, and this is the honest part. Passive rental income in a corporation gets no small-business deduction; it's taxed at roughly 50% (with a refundable portion). Add land transfer tax on transfers, harder mortgage financing, and loss of the principal-residence exemption, and for a small landlord a corporation frequently costs more than it saves.
Often not, and this is the honest part. Passive rental income in a corporation gets no small-business deduction; it's taxed at roughly 50% (with a refundable portion). Add land transfer tax on transfers, harder mortgage financing, and loss of the principal-residence exemption, and for a small landlord a corporation frequently costs more than it saves.
Let's be straight with you, because a lot of online advice glosses over this. Rental income from property you simply hold and rent out is passive income, and passive investment income earned in a corporation does not qualify for the small-business deduction. Instead of the ~12.2% rate active businesses enjoy, it's taxed at roughly 50% inside the corporation. Part of that is refundable when the corporation later pays taxable dividends to you (the system is roughly integrated), but you don't get the cheap 12.2% deferral that makes incorporation attractive for an operating business.
So the headline reason people incorporate, keeping profit at 12.2% and deferring, mostly doesn't apply to a buy-and-hold landlord. If you own one, two, or a few rental units, running them personally is often simpler and no worse on tax. Incorporating adds annual corporate returns, accounting fees, and complexity for a benefit that may not exist. We'd rather tell you that up front than sell you a corporation you don't need.
Beyond the tax point, there are frictions that catch investors by surprise. First, land transfer tax: moving a property you already own personally into a corporation is a transfer, and it can trigger Ontario land transfer tax (and municipal LTT in Toronto) on the property's value: a large, immediate cash cost. Buying new property directly in the corporation avoids the transfer, but you still pay LTT on the purchase like anyone else.
Second, financing gets harder. Many residential lenders are less comfortable lending to a corporation, may require personal guarantees anyway, and often offer commercial-style rates and terms rather than the best residential mortgage pricing. Third, you lose the principal-residence exemption on anything the corporation owns. A corporation can't have a principal residence, so if you ever thought of living in or converting a unit, holding it corporately removes that valuable exemption.
None of this makes a corporation wrong; it makes it a decision to run through real numbers with an accountant and mortgage broker, not a default.
There are real cases for incorporating in real estate. The clearest is when your activity is active rather than passive: flipping, building, or running a real estate business with enough activity and people that the income is active business income, which can then access the small-business rate. A genuine property-development or flipping operation is a different animal from a passive landlord.
It can also make sense at scale. Once you hold many doors, a corporation (often with a holding company above it) can help with creditor protection, keeping each property or portfolio at arm's length, bringing in partners or investors through share structures, and estate planning, passing shares to the next generation more cleanly than passing title to buildings. If you're building a portfolio you intend to grow and eventually transition, the structure earns its keep. For two rentals and a plan to hold them quietly, it usually doesn't.
If you do incorporate, think about structure early. Active real estate operators sometimes run an operating company for the business and a holding company above it to hold cash and equity out of the operating company's reach: the classic operating-co / holdco split. Passive investors building a portfolio might use a corporation per property or per project to isolate risk, though each corporation carries its own filing and accounting cost.
The point is that structure should follow a strategy (protect assets, admit partners, plan an estate), not precede one. Don't stand up a holdco and three subsidiaries before you own enough to justify them; premature complexity just bleeds accounting fees. Start with the plan, then build the structure that serves it. CorpStart can incorporate the operating company, the holding company, or both once you know what you need.
If, after running the numbers, a corporation makes sense (active operations, a growing portfolio, or an estate plan), you answer a short questionnaire: numbered or named, your director and shareholder, an Ontario registered office, and your share structure. About fifteen minutes, and we flag anything off before you pay.
We prepare your Articles of Incorporation, By-law No. 1, organizational resolutions and share registers, and file with the Ontario Business Registry, usually within one to two business hours, with your digital minute book the same day. And if the numbers say a corporation won't help your situation, we'll be honest about that too.
Three steps, once you've confirmed a corporation is right for you.
Confirm it makes sense
Run the numbers with your accountant: active vs. passive income, financing, land transfer tax and your goals. Incorporate only if it helps.
We prepare and file
CorpStart drafts your Articles, By-law No. 1 and resolutions, then files with the Ontario Business Registry, usually within 1 to 2 business hours.
Set up banking and financing
Your Certificate of Incorporation and digital minute book arrive the same day, ready for a corporate bank account and lender conversations.
Holding rentals personally vs. in a corporation
| Factor | Personal ownership | Corporation |
|---|---|---|
| Tax on passive rental income | Your personal rate | ~50% (partly refundable), no SBD |
| Small-business deduction? | N/A | No, for passive rental income |
| Land transfer tax to move existing property | None | Yes, can be a large cost |
| Mortgage financing | Easier, best residential rates | Harder, often commercial terms + guarantees |
| Principal-residence exemption | Available | Lost: a corp has none |
| Best for | One to a few rentals | Active/flipping, many doors, estate planning |
I own two rental condos. Should I incorporate them?
Probably not. Passive rental income in a corporation is taxed around 50% with no small-business deduction, moving your existing units in can trigger land transfer tax, and corporate mortgages are harder and pricier. For a couple of buy-and-hold rentals, personal ownership is usually simpler and no worse on tax. Run the numbers with an accountant, but don't assume incorporating saves money here.
Why doesn't rental income get the 12.2% small-business rate?
Because it's passive investment income, not active business income. The small-business deduction is reserved for active businesses. Rent from simply holding and leasing property is passive and taxed at roughly 50% in the corporation, with a portion refundable when the corporation pays you taxable dividends. Only genuinely active real estate work, like flipping or development at scale, can access the active-business rate.
When does incorporating for real estate actually pay off?
When your activity is active (flipping, building, an operating business with real activity and staff), or at portfolio scale where creditor protection, partners, and estate planning matter. A corporation, often with a holding company above it, can isolate risk between properties and pass shares to the next generation cleanly. For a small passive landlord, those benefits usually don't outweigh the costs.
Will I lose the principal-residence exemption?
For anything the corporation owns, yes. A corporation can't have a principal residence, so the exemption that shelters gains on your own home doesn't apply to corporately-held property. If there's any chance you'd live in or convert a unit, holding it personally preserves that exemption, an important factor for many small investors.
Can CorpStart set up a holding company for my portfolio?
Yes. If your strategy calls for it (an operating company with a holdco above it, or a corporation per property), CorpStart can incorporate the pieces once you and your accountant have settled the structure. Our advice is to let the strategy come first: don't build layers of companies before you own enough to justify the annual filing and accounting cost.
Only if the numbers work.
$279 service fee + $300 Ontario government fee. We'll help you incorporate when it makes sense, and tell you honestly when it doesn't.
Start my corporationCorpStart is a document preparation service, not a law firm. The information on this page is general in nature and does not constitute legal or tax advice. For advice specific to your situation, consult a licensed lawyer or accountant.