Incorporating is one of the most impactful financial decisions for a business owner. At the right revenue level, it saves $10,000–$40,000 in taxes annually while protecting personal assets.
Federal vs. Quebec Incorporation
Provincial Quebec incorporation is usually sufficient for businesses operating only in Quebec and costs less to maintain. Federal incorporation provides a nationwide protected corporate name.
The Tax Savings
As a sole proprietor earning $150,000, your combined marginal rate reaches 53.31%. Through a corporation, the first $500,000 of active business income is taxed at ~12.2% — creating substantial tax deferral.
Step-by-Step Process
- Choose a corporate name or use a numbered company
- File Articles of Incorporation with the REQ (~$318 online)
- Receive your NEQ (enterprise number)
- Register federally with CRA for your Business Number
- Register for GST/QST
- Open a corporate bank account
- Set up payroll if paying salary
When to Incorporate
Generally when net self-employment income consistently exceeds $80,000–$100,000 and you don't need all of it for personal living expenses.
Ongoing Compliance
Annual REQ return, T2 (federal) and CO-17 (Quebec) corporate returns, GST/QST returns, and payroll remittances are all required annually.