Incorporation vs. Self-Employed
Benefits of Self-Employment
Disadvantages of Self-Employment
the Fairness for the Self-Employed Act, the Canadian Government has
extended Employment Insurance (EI) to self-employed Canadians,
recognizing their contribution to the Canadian economy and development.
Difference between Self-Employed and Employed
There is a fine line between self-employment and being employed. It is important to know whether you are self-employed or an employee as it will affect your entitlement to EI benefits, and how you are treated under other Canadian legislations.
In deciding whether a person is an employee or self-employed Revenue Canada considers the relationship between the payer and the worker and looks at:
Benefits of Incorporation
General Steps to Incorporation
-There are two types of incorporation in Canada, federal and provincial. Both can be used to protect your business.
• Provincial: Your Corporation will have the right to only establish and carry on their business in the province/territory that the corporation has been registered in.
• Federal: A corporation is able to product their business in all provinces and territories. Your corporation will be authorized to continue business should there already be a company doing business under a similar name.
** If you are setting up a one person or small non-reporting corporation federal incorporation most likely is not the best option, provincial incorporation will generally serve the needs of a small business.
-To file an incorporation application you will need to follow these general steps:
1) Choose whether to incorporate federally or provincially
2) Choose your corporate name. This will be a three component name including, a distinct portion that identifies your corporation, a description of your particular activities, a legal element that identifies the business as a corporation.
3) Your corporate name will have to be searched and reserved.
4) Prepare your incorporation documents including the memorandum, articles of incorporation and notice of office.
5) File your incorporation documents and pay the incorporation fees.
Resources for the Self-Employed and Incorporated
• Canada Business, Government Services for Entrepreneurs (www.canadabusiness.ca/eng): Provides information on a variety of topics ranging from taxes to grants and hiring/managing staff.
• Canadian Federation of Independent Business (CFIB) (www.cfib-fcei.ca/english/index.html): Membership is required
• Canada Revenue Agency (www.cra-arc.gc.ca/menu-eng.html): Gives general information concerning taxes in Canada.
• Industry Canada (www.ic.gc.ca/eic/site/ic1.nsf/eng/home): Provides information for both businesses and consumers alike.
• Canadian Women’s Business Network (www.cdnbizwomen.com)
• Job Bank (www.jobsetc.gc.ca/eng/categories.jsp?category_id=36&crumb=36)
• Canada News Centre (http://news.gc.ca/web/article-eng.do?nid=4933319): Announcement of the Canadian government extending EI to self-employed Canadians.
• Canada’s Economic Action Plan (www.actionplan.gc.ca/eng/index.asp): Provides information on the Canadian government’s recent plans to revitalize and support the Canadian economy.
• Creatively Self-Employed (www.creativelyselfemployed.com): Provides information for writers who are self-employed along with information concerning a variety of other areas.
• “How to be a Self-Employed Writer: The Abridged Version” by Rich Gallagher (www.writersweekly.com/sucess_stories/003103_11232005.html): An article on how to earn a living working as a self-employed writer.
• “Incorporation for Writers” and “Income Tax Guide for Writers” these sources are available at the Writers’ Union of Canada and can be accessed at a cost. (www.writersunion.ca/content/writers-union-publications)
• “Tax Matters: Employee vs. Self-Employed” (www.cnmag.ca/issue-29/721-tax-matters-employee-vs-self-employed)
• Canada Revenue Agency (www.cra-arc.gc.ca/E/pub/tg/rc4110/README.html): Outlines and explains the differences between a self-employed worker and an employee.