Simplicity of Solo Incorporation
In a single-person corporation, one individual typically holds all the key roles:
- Shareholder (owner)
- Director (governance)
- Officer (management)
This makes decision-making seamless. There’s no need to negotiate terms with others, divide ownership, or resolve internal disagreements. Many early-stage businesses are set up this way to launch quickly and maintain control.
It also allows founders to defer more complex structuring decisions—like shareholder agreements or voting rights—until later, when the business is ready to bring in others.
What Happens When Multiple People Are Involved?
When two or more people start or join a corporation, things change. The legal structure becomes more complex, and early-stage decisions take on greater long-term significance.
Key Questions That Arise:
- Who owns how much of the company?
- Who has the right to make which decisions?
- What happens if someone wants to leave or gets forced out?
- How are profits distributed?
- Can someone sell their shares without the others’ consent?
Without clear answers to these questions, small disagreements can quickly turn into major disputes.
Rights and Obligations Between Shareholders
When there are multiple shareholders, Ontario law provides a default set of rules under the Ontario Business Corporations Act, but these "baseline terms" may not be enough or may not reflect accurately what founders actually want.
For that reason, it’s common to create a Shareholders’ Agreement to more clearly define:
- Voting rights
- Profit allocation and dividends
- Exit or buyout mechanisms
- Restrictions on transferring or selling shares
- Dispute resolution procedures
A shareholders' agreement becomes especially important when shareholders also serve as directors or officers, blurring the line between ownership, control and everyday decision-making.
The Risk of Disputes
Even among friends or family, disagreements are common. Without a clear agreement in place, courts rely on default corporate law, and litigation is time-consuming, expensive, and often damaging to the business.
Common triggers for disputes include:
- Unequal work contributions
- Conflicting visions for the business
- Profit distribution disagreements
- Lack of clarity on roles or responsibilities
By contrast, solo entrepreneurs avoid these complications entirely. That’s why many new founders choose to incorporate alone first, and then bring others in only when the time is right, under terms that are clearly documented.
Final Thoughts
Solo incorporation offers simplicity and control. It removes the need for negotiation between parties and minimizes the risk of early-stage conflict. As your business grows, and as you bring on other shareholders, investors, and key employees, get proper legal and tax advice to make sure your company and your business partners have a solid legal foundation to build upon.
