Is Incorporating in British Columbia Worth It for Contractors and Consultants?
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20 Jun 2025
Are you a contractor or consultant wondering if it’s time to get incorporated? Maybe you’re hitting six figures and feeling that tax bite a little too hard. Or maybe a client asked if you're incorporated and you weren’t sure what to say. Many business owners reach this stage and start asking: should I incorporate my consulting business?
It’s a big move. It can save you a lot of money, but only if it fits your situation. So let’s walk through exactly what you need to know to make the right call.
Key Takeaways
- Incorporating can lower your tax bill, protect your assets, and help you grow long-term.
- If you're earning more than you spend personally (typically around $100K+), it’s worth looking at.
- But it’s not free, setup costs, annual filings, and admin work are part of the deal.
- Talk to a professional (like us at CJCPA) before making the move.
So, Should I Incorporate My Consulting Business?
Here’s the short version: if your business is bringing in consistent income, especially over $100,000, and you don’t need to pull every dollar out for personal use, incorporating in BC could be worth it. It allows you to pay less tax on retained income, protect your personal assets, and possibly sell your business later with better tax treatment. But if you're just starting out or still riding the income rollercoaster, staying a sole proprietor might be better for now.Why Contractors and Consultants Choose to Incorporate
Lower Taxes
BC’s small business corporate tax rate is 12%. That’s a lot lower than the top personal rate of 53.5%. If you don’t need to use all the money you earn, you can defer taxes and reinvest in your business.Income Splitting
You may be able to pay dividends to a spouse or adult family member, helping reduce the total tax paid across your household.Limited Liability
When you’re incorporated, your business is legally separate from you. That means if something goes wrong, your personal home, car, and savings aren’t automatically on the line.Selling the Business One Day?
If that’s part of the plan, you could benefit from the lifetime capital gains exemption, which can shelter up to $1 million from tax when you sell.Looks More Professional
Clients often see incorporated businesses as more established and trustworthy.But Incorporation Isn’t for Everyone
Incorporating in Canada comes with a few trade-offs.More Paperwork
You’ll need to keep proper corporate records, file annual returns, and separate business and personal finances.Can’t Use Losses Personally
If your business loses money, you can’t write that off against your personal taxes. The loss stays inside the corporation.When Does Incorporating Make Sense?
Here’s when you should seriously consider it:- You're consistently earning $100K or more.
- You don’t need all your profits for personal use.
- You want to save on taxes or plan for retirement through your business.
- You want personal liability protection.
- You’re thinking about building something to sell later.
