As an independent contractor, you may be considering setting up a personal service business (PSB). A PSB is a type of business in which the services you provide are primarily your own personal skills or expertise, rather than being based on the use of capital or equipment. There are several important things you should know about personal service businesses in Canada.

  1. Determine if you qualify as a personal service business. To qualify as a PSB, you must meet certain criteria. This includes being self-employed and providing services through a business you own, rather than as an employee of someone else. Your services must also be primarily based on your personal skills and expertise, rather than being provided through the use of capital or equipment. If you meet these criteria, you may be eligible to set up a PSB.
  2. Know the tax implications of setting up a PSB. As a PSB owner, you will be responsible for paying your own taxes and contributions to programs such as employment insurance and the Canada Pension Plan. This means you will need to set aside money from each payment you receive to cover these expenses. You may also be eligible for certain tax deductions and credits, such as the small business deduction, which can lower the amount of tax you owe.
  3. Understand your liability as a PSB owner. As a PSB owner, you are personally responsible for any debts or legal liabilities that arise in relation to your business. This means that if your business is sued or goes bankrupt, your personal assets such as your home or savings could be at risk. It is important to consider this risk when setting up your PSB and to take steps to protect yourself, such as by getting liability insurance.
  4. Know your obligations to clients and customers. As a PSB owner, you are responsible for delivering high-quality services to your clients and customers. This includes being professional, timely, and reliable, and ensuring that you meet any specific requirements or expectations that have been agreed upon. You should also be aware of any industry-specific regulations or standards that apply to your business, and make sure you are compliant with them.
  5. Consider the benefits and drawbacks of setting up a PSB. There are several advantages to setting up a PSB, including the flexibility to set your own schedule, the opportunity to work on a variety of projects, and the potential to earn a higher income than you would as an employee. However, there are also some drawbacks to consider, such as the lack of benefits and job security that come with traditional employment, and the added responsibility of managing your own taxes and contributions.
  6. Get professional advice if needed. Setting up a PSB can be complex, and it is important to make sure you are doing it correctly. If you are unsure about any aspect of the process, or if you have specific questions about your business, it is a good idea to seek the advice of a lawyer or accountant. They can help you understand your rights and obligations as a PSB owner and ensure that you are set up for success.

In conclusion, personal service businesses can be a great option for independent contractors who want to take control of their careers and earn a higher income. However, it is important to understand the tax and liability implications of setting up a PSB, and to be aware of your obligations to clients and customers. By being informed and taking the necessary precautions, you can set yourself up for success as a personal service business owner in Canada.