Things to Consider as Independent Contractors
Many are wondering whether arranging their work as an independent contractor is advantageous.
While there are generally more deductions you can take as an independent contractor, please consider the following before you incorporate:
Accounting and Tax Compliance costs: you will need to maintain accounting records and other monthly, quarterly, or annual tax compliance (such as GST / HST, PST, QST, or annual corporate income tax returns).
Regulatory and Legal costs: from incorporation to annual filings, you may need to seek external counsel advice or assistance. Many provinces or municipalities also require license to do business or operate in their jurisdiction.
Insurance Costs: It is often advised (and prudent) to purchase business liability or other forms of independent contractor insurance to mitigate any potential claims against you and your business.
Employer Health Tax: In certain provinces such as British Columbia or Ontario, an employer is responsible for computing and remitting the appropriate Employer Health Tax, which is an annual tax with respect to employee remuneration paid.
Employee Benefit: although not technically a hard cost to the business, you could forgo extended medical, dental plans, or paid vacation, which are common benefits offered by employers.
Employer Portion of EI and CPP: As an independent contractor, you will be responsible for both the employee and employer portion of CPP and EI.
While the list is not exhaustive, it is important you consider all these factors before incorporating.