Hello All,
I thought I'd ask here as some of you may have done this already.

I'm currently job hunting and one position I'm applying for is a contract job and it's been stated that I need to be incorporated.

This isn't something I have ever done before so I'm looking for advice on what is involved and how easy and quickly can it be set up.

I've had a quick look and I think provincial incorporation would be the best bet for me as it seems to be less paperwork and federal incorporation and I don't intend to work in any other province than Ontario.

Any advice or suggestions greatly appreciated.

You can setup an Ontario numbered company very quickly as no name checks/confirmations are required. There's lots of info from Google like this:-

http://sbinfocanada.about.com/cs/sta...gontario_3.htm

Thanks, I'll certainly have a read of that.

It is not as simple as just registering a corporation. There are legal obligations, annual filing fees, payroll, WCB, accountants fees, costs associated with closing down the corporation if you choose not to continue. Do it wrong and it can be costly. You have to file coporation tax returns as well as personal tax returns.

Not something I would do just to get a job.

It's increasingly common to have to do so, it's the only way to have a true $n paid for n hours worked, relationship with the person paying for your services. Otherwise you start getting involved with legislation demanding holiday pay, non-discrimination, responsibility for the actions of empoyees, all the rest of that nanny state nonsense.

I have several Ontario numbered corporations (there used to be a tax holiday for new businesses so we kept flipping the corporation into a new one, hoping to defer until death) and a Federal numbered corporation (and a couple of US corporations, and, and, and). I think this is typical baggage for a long term contractor. If the work is just in Canada then an Ontario corporation is fine. Lots of people need them so my accountant goes and sets up a bunch once once a month, I'd guess he's typical. I've never shut one down as that costs a bit less than $1,000 (about the same as starting one) whereas the marginal cost of keeping one going is negligible. I think it best to assume that corporations are forever and to leave money in one's will to keep them ticking over, closing one might catch the interest of RevCan's auditors.

If it's just a shell to allow a computer pimp to wash his hands of you in terms of tax and liability issues, then the taxes you need to be aware of are EHT, payable January 15th, on pain of death, and GST, which they'd like paid quarterly but don't get in a frenzy over. There may also be corporation tax though, if there is, it'll likely be related to a greater saving in personal income tax; otherwise you wouldn't be declaring income in the corporation.

Something that might become an issue is insurance for professional liability, some clients (though afaik not pimps) ask that the corporation hold a policy, be aware that such a policy is very expensive.

All interesting information. Ideally I'd get a full time job, but it seems quite a few places will start you off on a contract and if you work out, migrate you to a full time employee. However this is the first time I've been told a potential employer requires you be incorporated. If I get an interview I will ask them why this is, and if it is an absolute requirement, one hopes that they may be flexible, especially if I happen to be a good candidate for the job.

One thing I have been told is not to do anything until an offer has been made, which is sound advice.

I'll be honest and say that at present it seems to be quite a lot of effort and expense, especially if the contract turned into a full time job, as there wouldn't be a real need for the incorporation at that point.

Some advantages to the payer of not having an employer/employee relationship are:

- no requirement to pay for vacations nor to provide benefits

- no need to deduct and manage taxes or other government dues

- no need to give notice or reason for dismissal

- no workman's comp or health & safety concerns, injuries are the worker's problem

- no responsibility for errors made by the worker

These are some of the reasons why contract rates need to be twice employees' salaries. Is the "employer" in this case a real firm, with a business other than computing, or just a pimp?

Yes it is a real firm, one I have heard of and whose services/products I use, and their primary activity is not computing, for example, they are not a software developer.

Then it seems an odd arrangement, there's usually something slightly disreputable about firms that want employees to be incorporated. Good luck.

Even if you are incorporated, if the employment arrangement does not meet the CRA criteria for employee/self employed relationship, they may still disallow it.

Improbable. I know of dozens of people who have worked that way for a single client for more than a decade without being busted. In any sort of real world sense they're all employees.

Not busted as in not caught or audited and CRA accepted it? Unless CRA accept it they can still disallow it, unless there is a ruling and go back up to 7 years, longer if they suspect wrong doing. If one is taking this route, it may be best to request a ruling from CRA, then at least you're covered.

I don't think an inquiry "I intend to incorporate so as to circumvent employment law and to reduce my tax liability, is this ok with you?" is likely to go over a storm. This is the sort of thing one does without ramming the fact of it up the taxman's nose.

What I had in mind was "not caught" but, reflecting on it, I was working in this manner both times I was audited and no fuss was made. My colleague over there owes a couple of hundred grand in back taxes and is in constant contact with RevCan but hasn't been chastised for his numbered company. I think they turn a blind eye.

It is a subject that often crops up amongst my clients who are mostly small general contractors and subtrades.

It seems that as long as things are done properly the CRA don't try and get in the way of a commercial agreement. By done properly I mean:

* GST is collected and paid
* the sub files and pays their taxes on time
* the "employer" files the correct information returns

It is also highly desirable to have a contract that specifically states that the arrangement is not intended to create an employee/employer relationship and that nothing in the arrangement will entitle the "worker" to any employee benefits.

Even better for the worker to operate through a corporation as it is one extra degree of separation from an employer/employee relationship.

The problems start when the "worker" doesn't pay their taxes. When the CRA chase them the "employer" invariably ends up being audited. Then, if the employer cannot prove the arrangement was a subcontract, the CRA will assess withholding taxes, CPP, EI, interest and penalties on the employer.

The worker has little risk.

Thanks again to all for the information.

Now a little more information to throw back into the mix.

The opening was introduced to me by a US based recruitment agency, who obtained my information from an online job seeker site. The client is a Canadian company and the position is in Canada.

Incorporation isn't required by the company who has the opening but by the recruitment company and that is due to them being US based.

At least it makes a little more sense now as to why I'd need to do this. I feel it is somewhat ironic that it's a US company that has picked up my resume, if it had been a Canadian one then perhaps this issue would not have popped up.