FAQ-039 EN - What is the real difference between staying self-employed and incorporating?

As a self-employed person, you operate under your personal name and are directly liable for all debts and obligations. Income is reported on your personal tax return at the personal marginal rate, significantly higher than the corporate rate in Quebec. By incorporating, you create a separate legal entity. The corporation pays tax at the corporate rate, which is much lower. You control when and how you compensate yourself (salary, dividends, or both). Personal liability is in principle limited to obligations you have personally guaranteed.