I'm a web developer in Toronto who is currently operating as a sole proprietor. A prospective new client would really like to hire me for a major new project, but they can only deal with incorporated companies and cannot hire a sole prop. I'm looking for advice on incorporating from a) people in Canada and especially Ontario, but also from b) anyone who has any relevant advice about the experience of becoming an Inc., even if you are not Canadian. Yes, I will be engaging an accountant or lawyer for specific advice if I do decide to move forward, so I'm not worried that some specific advice may not be appropriate for my jurisdiction: I'm just trying to get a broad picture of what it's like (and some recommendations for lawyers/accountants).
My main concerns are the ongoing costs and complexity of running as a corporation given the kind of work I do. I would be the sole owner and employee, I don't anticipate hiring anyone as a sub-contractor, let alone an employee, and I expect to continue working out of my home office rather than a store front. I'll be paying taxes and CPP but no EI, as, of course, I would not be eligible for EI payments as owner/sole employee. If it weren't for this client, I'd probably be staying sole prop.
Arguments FOR incorporation: Are there any other advantages that I'm missing?
1) This project alone could bring in as much money over the next few months as I've made all year so far. The hourly rate will be the highest I've ever charged. The work is well within my comfort zone and I know that I can deliver something really good. I have worked with my main contact before and we got along very well.
2) This may open the door for further work with the same company, but it could also make me eligible to work for crown corporations and other companies who also require that you be incorporated.
3) The usual reasons why people say that incorporation offers advantages: you can offset income to years where you can take less of a tax hit and it protects your personal assets in case of legal action.
Arguments AGAINST incorporation:
1) Incorporating, a name search (if I don't choose to operate as a numbered corporation), consulting with an accountant and/or lawyer, getting accounting software and setting up a bank account and cheques could cost (I'm estimating) $500-1000. Are there any other start up costs that I'm missing?
2) I could do my own corporate taxes, but I'd feel more secure going to a good accountant, so that's probably another $500+ a year. (This fellow
has been recommended here before: any other feedback or recommendations for Toronto accountants or lawyers?
3) As a sole prop, tax writeoffs
for software, other business purchases and use of my home office have been pretty straightforward. This may be best answered by a professional, but if you have experience in this area FOR CANADA, let me know.
4) Liability insurance:
another client has asked that I get liability insurance to continue working for them as a sole prop already, so I expect that I should get this if I go coprorate. My first round of quotes (for a sole prop) put that at $800-1000, but from what I can see, a corporation doing the same kind of work would be charged closer to $2000. Canadian incorporated web/IT people: does that sound about right? And are there any insurance companies you would recommend?
I think that's about it. Thanks!