Is it worth incorporating, when working in Canada as a contractor for an employer in the US?
"Interesting as I am in the exact same situations as yourself.  I, in fact, just incorporated.  You will be able ""save"" more in taxes in the end.  The reason I put ""save"" in quotes, is that you don't necessarily save on taxes, but you can defer taxes.  The driving factor behind this is that you specify your own fiscal calendar/year.  Incorporating allows you to defer income for up to 6 months.  Meaning that if you make your fiscal year starting in August or September, for example, you can claim that income on the following year (August + 6 months = February).  It allows you to keep the current year taxes down.  Also, any income left over at year end, is taxed at 15% (the Corporation rate) rather than the 30-40% personal rate you get with a sole-proprietorship.  In a nutshell, with sole-proprietorship, all income is taxable (after write-offs)... in a corporation, you can take some of that income and keep it in the corporation (gives your company a ""value""), and is only taxed at 15% - big saving there. I primarily work with US businesses.  I am, however, a dual-citizen, US and Canadian, which allowed me as a sole-proprietor, to easily work with US companies.  However, as a sole-proprietor or a Corporation, you simply need to get an EIN from the IRS and any US company will report earnings to that number, with no deductions.  At year end, it is your responsibility to file the necessary tax forms and pay the necessary taxes to both countries.  Therefore you can solicit new US business if you choose, but this is not restricted to corporations.  The real benefit in incorporating is what I mentioned above. My suggestion to you is to speak with you CA, who can outline all benefits.  Revenue Canada's website had some good information on this topic as well. Please let me know if you need anything else explained."
There are many different types of 1099 forms. Since you are comparing it to a W-2, I'm assuming you are talking about a 1099-MISC form.  Independent contractor income If you are a worker earning a salary or wage, your employer reports   your annual earnings at year-end on Form W-2. However, if you are an   independent contractor or self-employed you will receive a Form   1099-MISC from each client that pays you at least $600 during the tax   year. For example, if you are a freelance writer, consultant or   artist, you hire yourself out to individuals or companies on a   contract basis. The income you receive from each job you take should   be reported to you on Form 1099-MISC. When you prepare your tax   return, the IRS requires you to report all of this income and pay   income tax on it. So even if you receive a 1099-MISC form, you are required to pay taxes on it. In Canada, the majority of your taxes are remitted by the employer on your behalf after the employer deducts the calculated amount from your pay. Then when you file your income tax return you pay (or get reimbursed) the difference stemming from your particular social situation. Note that this is optional. The employer has to pay its own part of some deductions, but the employee can opt out from getting the standard amount of income tax deducted at source. It is his responsibility alone to pay for his taxes. So in this context, it's entirely possible to advertise an approximate net salary. Most of the accounting over here is done by way of accounting software, and those that support payroll go through a testing and acceptance phase for each revision to the tax tables, so the amount calculated is usually pretty exact (I got reimbursed 120$ last year). I'm not sure 1099-MISC is what you should expect. Equity means ownership, and in LLC context it means membership. As an LLC member, you'll get distributions and should receive a K-1 form for tax treatment, not 1099 or W2. If the CEO is talking about 1099 it means he's going to hire you as a contractor which contradicts the statement about equity allocation. That's an entirely different situation. 1) Specifically, would the 1099-MISC form be used in this case? 1099-MISC is used to describe various payments. Depending on which box is filled, the tax treatment may be as of employment income (subject to SE taxes) or passive income (royalties, rents, etc - subject to various limitations in the tax code). 3) If this is the only logical method of compensation (receiving a % of real estate sales), how would it be taxed? That would probably be a commission and taxed as employment income. I suggest to get a professional tax adviser consultation on this issue, with specific details, numbers, and kinds of deals involved. You can get gain or lose a lot of money just because you're characterized as a contractor and not LLC member or employee (each has its own benefits and disadvantages, and you have to consider them all). 4) Are there any advantages/disadvantages to acquiring and selling   properties through the company as opposed to receiving a % of sales? Yes. There are advantages and there are disadvantages. For example, if you're using a corporation, you can get salary, if you're a contractor you cannot. There are a lot of issues hidden in this distinction (which I've just discussed with KeithS in this argument). "This is the best tl;dr I could make, [original](http://www.canberratimes.com.au/business/the-economy/australians-stuck-in-a-debt-trap-with-wages-having-risen-by-just-3-a-year-over-the-past-decade-20170918-gyk1o2.html) reduced by 89%. (I'm a bot) ***** &gt; When third-quarter GDP is released in December, the absence of the contraction from a year earlier could lift annual growth close to 3 per cent, compared with 1.8 per cent in the second quarter.  &gt; The next wage-price index will also incorporate a 3.3 per cent hike in the minimum rate and may lift the gauge above the 1.9 per cent record low it&amp;#039;s held at for the past year.  &gt; Its growth is behind the US and euro zone&amp;#039;s respective 3 per cent and 2.3 per cent, Canada&amp;#039;s 4.3 per cent and Germany&amp;#039;s 2.1 per cent.   ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/7199yd/australians_stuck_in_a_debt_trap_with_wages/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ ""Version 1.65, ~213402 tl;drs so far."") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr ""PM's and comments are monitored, constructive feedback is welcome."") | *Top* *keywords*: **per**^#1 **cent**^#2 **growth**^#3 **quarter**^#4 **wage**^#5" "I don't know what you mean by ""claim for taxes,"" I think you mean pay taxes.   I'm not sure how corps function in Canada but in the US single owner limited liability entities typically pass the net income through to the owner to be included in their personal tax return.   So it seems all of this is more or less moot, because really you should probably already be including your income sourced from this project on your personal taxes and that's not really likely to change if you formed something more formal.  The formal business arrangements really exist to limit the liability of the business spilling over in to the owner's assets.  Or trouble in the owner's life spilling over to interrupt the business operation.  I don't know what kind of business this is, but it may make sense to set up one of the limited liability arrangements to ensure that business liability doesn't automatically mean personal liability. A sole proprietorship or in the US we have DBA (doing business as) paperwork will get you a separate tax id number, which may be beneficial if you ever have to provide a tax ID and don't want to use your individual ID; but this won't limit your liability the way incorporating does." "This arrangement is a scam to get around certain tax and benefits laws, both State and Federal. I know they can't get away with this with a person-as-contractor, but this ""he's not a contractor, he's a business owner"" may move it into a gray area. (I used to know this stuff cold, but I've been retired for a while.) The fact that they asked you to do this is at all is, IMNSHO, a Red Flag®. They think that this way they won't be paying 1/2 your FICA, your Workman's Comp, health insurance, overtime, sick leave or vacation time ... you will. A somewhat simplistic rule of thumb for setting contracting rates is to take your targeted annual salary as a full-time, full-benefits employee and double it. So $50,000 becomes $100,000 a year; $25/hour becomes $50/hour. You can tell them that driving to their workplace from your company's location is now a ""site visit"" and charge them your hourly rate for the one-way commute time. You could also tell them that your company charges 150% for hours worked over 40 hours/week, plus 150% on Saturdays and 200% on Sundays. Your company may also have a minimum 30 days notice of termination with a penalty kicker. Get it all in writing and signed by someone who has the authority to sign it. Also, Get A Lawyer. The most expensive contracts I've ever signed were ones I thought I was smart enough to draw up myself." My concern is if I need to report and pay extra taxes for the part of   the company that will be under my name Yes, d'uh. Of course. It's actually quite complicated when it comes to foreign companies owned by US people, and you'll need a good tax adviser (EA/CPA licensed in your State) who's fluent in that area. Citizenship has nothing to do with this, from tax perspective there's no difference between a green card holder and a citizen (except that green card holder cannot claim non-resident exemptions and certain tax treaties' exemptions). To be honest I don't know how any of this work in the US so my answer will be of very limited value to yourself, I suspect, but when it comes to the UK if you're going to get the same pay gross either way than being independent makes very little sense.  Running your own business is hassle, is generally more risky (although possibly not in your case) and costs money. Some of the most obvious costs are the added NI, probably the need for an accountant, at around £1200 p/a for basic accountancy service, you are obliged by law to have liability insurance and you probably want professional indemnity insurance, this will be around £600 p/a minmum, and so on and so forth.  On top of that, oficially anyway, as a contractor, you really shouldn't be getting any benefits from the client, and so health insurance, company car, even parking are all meant to be arranged by, and paid by, your company, and can't (or rather - shouldn't) be charged to the client. So - I would say - if you're seriously thinking about setting up a consultancy company, and this client is first of many - set up a company, but take into account the sums you need to earn. If you're really thinking about employment - be an employee.