Whether you should incorporate your side hustle depends on your annual income, the type of work you do, and your long-term business goals. If your side income is under $30,000 to $40,000 per year, staying as a sole proprietor or partnership is usually simpler and cheaper. However, if you're consistently earning $50,000 or more annually, the tax savings from incorporating (such as lower corporate tax rates and income splitting opportunities) may outweigh the costs of setup and accounting. The key is running the numbers for your specific situation. Many Canadian side business owners explore incorporation because it offers several potential advantages: - Lower tax rates: Small business income taxed in a corporation is often taxed at a lower rate than personal income, particularly in provinces like Ontario and British Columbia - Income deferral: You can keep profits inside the corporation and only pay personal tax when you withdraw funds as a salary or dividend - Liability protection: Incorporating creates a legal separation between your personal assets and business debts - Easier deductions: Corporate accounting makes it clearer what business expenses are eligible for deduction - Credibility: Some clients prefer working with incorporated businesses Incorporation typically becomes worthwhile when this CRA
There's no legal minimum income to incorporate, but it's generally not worthwhile below $40,000 to $50,000 annually because accounting and setup costs eat into tax savings. Calculate your specific situation using an incorporation tax calculator or with your accountant.
You can incorporate just your side business while keeping your employment job as is. Your side business corporation is separate from your personal income and your main employment.
You can leave profits inside the corporation indefinitely if you don't need the cash. This defers personal tax but you'll owe tax when you eventually withdraw funds as a dividend or salary. The optimal split depends on your marginal tax rate and corporate small business rate.
You must register for GST/HST once your side business revenue exceeds $30,000 in any four consecutive quarters, whether incorporated or not. Incorporation doesn't change this threshold. Use the [GST/HST Calculator](/tools/gst-hst-calculator) to estimate your obligations.
Yes. If your incorporated side business operates at a loss, you can carry losses backward three years or forward indefinitely to offset other corporate income, though the rules differ from sole proprietor losses on your personal return.