Incorporated vs. Sole Proprietor: What's Best for Canadian Truckers?

Thinking about incorporating your trucking business? Or maybe you’re wondering if staying a sole proprietor is the better route? You’re not alone—this is one of the most common questions we get at Truckers Pro CPA, especially from owner-operators who’ve been running their own show for a while.

Whether you’re just getting started or have been behind the wheel for years, figuring out the right business structure can feel like driving through thick fog without GPS. But don’t worry—we’re about to clear things up.

This guide walks through the pros and cons of incorporating versus staying a sole proprietor, focusing on what matters most to Canadian truckers: taxes, legal protection, costs, and long-term impact. By the end, you’ll have a clearer idea of which lane you should be driving in—and how to make the switch if it’s time to change gears.



Let’s dive in.

What’s the Difference Between Sole Proprietor and Incorporated?

First off, let’s break it down real simple:

• Sole Proprietor = You and your business are legally the same person.
  
• Incorporated Business = Your business becomes a separate legal entity (a corporation), and you become a shareholder or employee of that company.
  
  

Sounds small, but the differences are massive when it comes to taxes, liability, and how the government sees you.

Why Many Truckers Start as Sole Proprietors

Most truckers begin as sole proprietors because it’s just easier. No paperwork headaches. No extra accounting fees. No annual corporate filings.



You grab your truck, register a business name if needed, get your CRA business number, and boom—you’re in business.

Pros:

• Low startup cost
  
• Fewer forms and admin work
  
• All income goes directly to you
  
• No separate corporate tax filings
  
  

Real Example:

We had a trucker named Ron who ran solo as a sole proprietor for five years. He kept it simple: he paid taxes on his net income, tracked expenses in a notebook, and filed once a year. For someone grossing around $90K and keeping expenses light, it worked fine… for a while.

But Then Comes the Growth… and the Taxes

Here’s the twist. Once your income climbs—or your risk increases—being a sole proprietor can start to feel like a bumpy ride.



Sole proprietors in Canada are taxed at personal income tax rates, which can be steep once you pass certain thresholds. If your trucking business is making $100,000+, that tax bill starts eating into your profit faster than a $1.90/litre fuel stop.

That’s where incorporation starts looking real good.

Why Incorporate as a Truck Driver in Canada?

Incorporating means your trucking business becomes its own person (legally, at least). And that comes with some serious perks.



Pros:

• Lower corporate tax rate (roughly 12–15% on the first $500,000 of active business income in most provinces)
  
• Limited liability protection
  
• Income splitting opportunities (with a spouse, in some cases)
  
• Greater business credibility
  
• More options for retirement planning and tax deferral
  
  

Real Example:

One of our clients, Amrita, switched to a corporation after hitting $130K in income. After setting up a salary and dividends combo, she saved over $9,000 in taxes her first year—money she used to upgrade her truck and add a dash cam system.

Let’s Talk Legal Protection

This one’s big, and too many folks overlook it.

As a sole proprietor, you’re personally liable for any business debts or lawsuits. If something goes wrong—accidents, unpaid invoices, CRA issues—your personal assets (like your home or car) could be at risk.

Corporations, on the other hand, act as a legal buffer. Unless you’ve personally guaranteed something (like a lease or loan), your liability is limited to what’s in the corporation.



That peace of mind? Kinda priceless.

What Are the Downsides of Incorporating?

We won’t sugarcoat it—incorporating does come with its own set of costs and responsibilities.

Cons:

• Higher startup and maintenance costs
  
• More complex bookkeeping
  
• Separate tax return (corporate T2)
  
• Need to keep corporate records and file annually
  
  

But here’s the thing: with a solid accountant, those hurdles become manageable.

What About Taxes and Deductions?

Both sole proprietors and corporations can deduct business expenses: fuel, maintenance, insurance, meals, phones, etc. But corporations can offer more flexibility when it comes to tax planning strategies like:

• Splitting income with family (in some cases)
  
• Paying yourself a mix of salary and dividends
  
• Deferring income to a future tax year
  
• Investing retained earnings into the business
  
  

In short, corporations give you more levers to pull when it comes to tax time.

Cost Comparison: Sole Proprietor vs. Incorporated

As a sole proprietor, your CRA registration fees are usually minimal—often between $0 to $60—whereas incorporating can cost between $200 to $500 depending on whether you register federally or provincially. Tax filing is simpler for sole proprietors since you only need to file a personal T1 return. Incorporation, on the other hand, requires a separate corporate T2 return, which is more complex and may involve additional accounting fees.

When it comes to legal protection, sole proprietors have none—you’re personally liable for debts and lawsuits. Incorporated businesses offer limited liability, protecting your personal assets in most cases.

Sole proprietors are taxed at personal income tax rates, which range from about 15% to over 33% depending on your income. Incorporated businesses benefit from the lower small business corporate tax rate, typically around 12% to 15% on the first $500,000 of active income.



Income splitting isn’t an option for sole proprietors, but incorporated truckers may be able to split income with a spouse or family member under certain conditions. Lastly, business credibility tends to be lower for sole proprietors, while incorporated businesses often appear more professional to lenders, clients, and partners.

So, Which One Is Right for You?

Ask yourself:

• Are you earning over $100,000/year?
  
• Do you plan to grow your business or hire drivers?
  
• Are you concerned about lawsuits or liability?
  
• Do you want to pay yourself smarter?
  
  

If you said yes to most of those, incorporation is worth exploring.

But if you’re just starting out, prefer simplicity, and are keeping things lean for now, staying a sole proprietor may make more sense. You can always incorporate later—and we’ll be here when you’re ready.

How to Incorporate (When You’re Ready)

It’s not as scary as it sounds. Here’s the basic rundown:

1. Choose a business name (or go with a numbered company)
   
2. Register federally or provincially
   
3. Set up a corporate bank account
   
4. Apply for a CRA business number and corporate tax account
   
5. Start tracking business finances separately
   
6. Work with an accountant to set up your compensation structure
   
   

Better yet? Let Truckers Pro CPA handle it for you. We’ll walk you through each step, take care of the CRA setup, and ensure your taxes stay in the slow lane—not stalled on the shoulder.

Final Thoughts from the Driver’s Seat

Every trucker’s journey is different. Some want to keep it simple. Others are ready to build an empire. What matters most is understanding the road ahead and choosing the right vehicle to get you there—whether it’s a sole proprietorship or an incorporated business.



Truckers Pro CPA is not just number crunchers—we’re road-tested business guides who speak trucker. We’ll help you weigh your options, calculate the real impact, and make the choice that fits your goals.

Need help making the switch or just want a second opinion? Book a free consult. You’ve got enough on your plate—let’s make this part easier.