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Comment by sprice | Hacker News Reader

I'm a BC resident about to begin working remote for a US company.

I'm planning on setting up a sole proprietorship but am curious if there are advantages to incorporating.

I've only spoken briefly to an accountant (on the phone) and he recommended starting as a sole proprietorship and then looking at incorporating in the future.

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It comes down to liability in the event of an unsuccessful lawsuit:

Sole proprietorship - your personal assets may also be taken

Incorporation - only business assets are generally liable if insured accordingly

Corporations were formed so that trading merchants and ship captains didn't have to pay out when their lucrative expeditions killed off sailors and handlers.

https://www.ribbonfarm.com/2011/06/08/a-brief-history-of-the...

Generally speaking, incorporating as an individual doesn't save you much in the way of tax unless you get creative. It does give you the ability to defer income which in turn defers some tax.

On the downside, there is much more paperwork and expense from lawyers and accountants.

Source: after being incorporated in BC for 11 years I decided to go back to employee status.

I'm thinking of something similar. Very curious if you would provide updates on your final decision. I understand the basic advantages of incorporating (lower tax rate and limited personal liability if things go poorly). Curious what the advantages of going sole proprietorship would be if the costs of doing incorporation are this low.

AFAIK Canada does not have U.S.-style LLCs with pass-through taxation. This means you're most likely to be taxed twice: corporate tax on your corporation's profits, and income tax on your salary and/or dividends.

The sum of these two taxes might or might not be lower than income tax on a sole proprietorship depending on your level of income and how you categorize your expenses. Usually, the more money you make, the cheaper it is to incorporate.

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