# Sole proprietorship vs Incorporated Recruitment Agency.



## ions (Mar 23, 2012)

Dear Expert,

I am considering taking a contract through a recruitment agency.

The agency is offering me an option to be paid as a sole proprietor or incorporated. If I get paid as a sole proprietor I will get $2 less than if I was incorporated. I am currently a Sole Proprietor and am deciding if it's worth it for me to become incorporated.

This is an 8 month contract so if I work 8 hours * 20 days * 8 months * $2 = $2560 difference. 

Benefits of staying as Sole Proprietor: 

I do not have to register an incorporated company which I estimate will cost me around $500.
The agency is obligated to contribute the employer portion of CPP and EI premiums.
I do not have to hire an accountant to do my Incorporated tax statements. I currently do my own taxes and I love that control.

What would you advise? 

Thank you.


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## Spudd (Oct 11, 2011)

I would think the CPP/EI premiums alone would make up for the difference. Not to mention the headache of incorporating... But I have no real knowledge of incorporation so hopefully someone smarter will come along and contribute.


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## kcowan (Jul 1, 2010)

I guess the real question is: Is this a one-off 8 month contract or may it be extended or other contracts offered?


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## Just a Guy (Mar 27, 2012)

Most accountants will charge you about $1,000-1,500 more to do yor taxes, and that is an annual fee. 

Usually it depends on how much money you earn, the more profitable you'll be in the continuing future, the more benefits there are to incorporation. In this case, from what you've shared, I'd stick with the proprietorship.


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## ions (Mar 23, 2012)

Thank you for the replies.

I expect to be Consultant for many more years. I have been a self employed IT consultant (not using recruiters) for four years. I don't want to incorporate this year because there is only 1.5 months left and I don't want to deal with an accountant and the accountant fees.

I would prefer to incorporate in 2013 because of the deferable tax and liability protection but I am not sure if it's worth it. I love having control over my taxes (doing it myself) and the time and $ I have to spend with the accountant is another factor. 

If I could do my own Incorporated taxes this would be a no brainer. How difficult is it to do incorporation tax on your own?

Thank you


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## YYC (Nov 12, 2012)

ions said:


> Thank you for the replies.
> 
> I expect to be Consultant for many more years. I have been a self employed IT consultant (not using recruiters) for four years. I don't want to incorporate this year because there is only 1.5 months left and I don't want to deal with an accountant and the accountant fees.
> 
> ...


I'm basically in the same situation as you. However, when I first became a contractor I wasn't given a choice by the recruitment agency, I had to incorporate. That said, I think it's been the right choice for me. I've paid significantly less tax and been able to income split with my wife due to us both owning shares in the corporation.

To answer your last question, I don't believe it's a good idea to do corporate taxes on your own. Assume $1500 a year as a cost of doing business and hire a professional.


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## MoneyGal (Apr 24, 2009)

ions said:


> Thank you for the replies.
> 
> I expect to be Consultant for many more years. I have been a self employed IT consultant (not using recruiters) for four years. I don't want to incorporate this year because there is only 1.5 months left and I don't want to deal with an accountant and the accountant fees.
> 
> ...


Just for what it's worth: there's only a deferable tax benefit on funds left in the corporation. Unless you are able to leave relatively significant amounts in the corp, there's no real benefit to incorporating -- the existing tax deferral benefits (principally RRSP contributions) provide the same or an equivalent benefit. 

In this case, I think the agency has offered alternatives which are intended to be revenue-neutral for incorporated and unincorporated professionals. I don't think this provides a rationale for incorporating on its own.


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## Just a Guy (Mar 27, 2012)

When you incorporate you can pick your year end, it doesn't have to be December 31. I remember my accountant telling me you wanted to be in the second half of the year for tax reasons. Probably the deferral, so you should wait until after this contract. 

As for the extra fees, they are deductible in most cases.


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