He was confused...
The 1st question I asked was whether he registered as term employee, sole-proprietorship or incorporate when signing the contract with agency.
Below pros and cons should be considered for these three scenarios.
>> Term employee:
- Pros
Easy to deal with, as agency will do the admin work mostly, including the source deduction of CPP, EI, federal and provincial tax remittance, and issue T4 on time
- Cons
However, agency will deduct admin fee from the earning, sometime cost about $3 - $5 / hour earning depends on the party
>> Sole proprietorship
- Pros
It's a type of low cost business setup, good for small start-up and easy to handle. The owner can claim certain amount of business expenses depends on the nature of the business against the revenue and recover some GST/HST. it lowers personal income tax rate under proper planning and common practices.
- Cons
Has unlimited liability, taxation income are reported via personal income tax return. Tax rate grows high when income reaches certain level
>> Incorporate
- Pros
The most income tax advantage and limited liability. As long as there is finance management set up at the beginning and followed well, not much issue expected at the year end
- Cons
Cost of setting up and administrative expenses
To sum up, if there is higher net income expected for the business, it's recommended to go incorporate instead of proprietorship and term employee.
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