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Self-employed financially better than full-time ?

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  • Mar 10th, 2018 1:14 am
[OP]
Deal Addict
Oct 4, 2006
2204 posts
902 upvotes
Toronto

Self-employed financially better than full-time ?

Recently started a new job after a long time of being a self-employed freelancer.

There are advantages of a full-time job with regular paycheques vs hustling for work (although no job really is secure).
But the amount of taxes taken off the top of each paycheque is staggering!

Sure there are some other perks such as health benefits, but I suspect there are plans for the self-employed now.
At least as a self-employed individual, you can defer paying taxes till the end of the year. Plus you can claim expenses to lower your tax rate.
While I'm grateful for having a fulltime job, I'm kind of questioning if I made the right choice going back.
15 replies
Sr. Member
Nov 8, 2006
864 posts
327 upvotes
Toronto
You know you can always quit your full time job anytime you want, but not vice-versa.
Deal Expert
Jan 27, 2006
17149 posts
9881 upvotes
Vancouver, BC
Everything is a trade off. The fact that you are grateful for having a full-time job vs the taxes and pay is one of those trade-offs.

As for health benefits and plans, while they exist in the self-employed world, they are generally expensive for that they are and limited in coverage for what they provide - since you were self employed for so long, I'm surprised that you don't know that already.
Deal Addict
Feb 14, 2016
1754 posts
1177 upvotes
Accountant here;

Some of the benefits you highlighted as being self employed is not true

It depends on the income, but you are required to pay income tax either monthly or quarterly and if your income is super low so that your income tax is super low, the u may pay the income tax once a yr; but the odds are if the self employed income level is that low, you are basically earning far less than min wage. Or you can choose to pay at the year end when you file income tax, but gorcernment will charge you interest and penalty so you end up paying more compared to employee

When it comes to claiming expenses, companies pay for general expenses used by employees, so nothing comes out from their own pocket; but self employed person actually need to spend the money to get lower tax (for instance, lets say 100 dollar worth of supply is used; if its used by the employee, nothing comes out from his pocket; self employed person? Spent 100 bucks and end up saving 30 bucks (assuming its 30% tax rate to simpify) you still end up losing 70 bucks as self employe

So there is basically no benefit at all for being self employed other than u pick ur own hrs
Deal Addict
Nov 29, 2017
1264 posts
1246 upvotes
Not guaranteed continuous work=income when self employed
Deal Fanatic
User avatar
Dec 27, 2009
7398 posts
4666 upvotes
Victoria, BC
I agree with what the accountant said. Also, if self employed you pay twice the CPP.
Sr. Member
Nov 6, 2015
958 posts
560 upvotes
Guelph, ON
blindemboss wrote: At least as a self-employed individual, you can defer paying taxes till the end of the year. Plus you can claim expenses to lower your tax rate.
While I'm grateful for having a fulltime job, I'm kind of questioning if I made the right choice going back.
Depending on how much you make a self-employed person may have to pay taxes throughout the year, not just at year-end. And the expenses you claim are actual expenses (assuming you are honest), so there's no net gain - if you paid $100 for office supplies then you have $100 less, but being an employee you would not pay for your own supplies.

That being said, yes, you do have more flexibility being self-employed. Being an employee on the other hand has predictability, i.e. you can make budgets because you know exactly what you will have.
Sr. Member
Nov 3, 2007
871 posts
56 upvotes
Cambridge
JIB9022 wrote: Accountant here;

Some of the benefits you highlighted as being self employed is not true

It depends on the income, but you are required to pay income tax either monthly or quarterly and if your income is super low so that your income tax is super low, the u may pay the income tax once a yr; but the odds are if the self employed income level is that low, you are basically earning far less than min wage. Or you can choose to pay at the year end when you file income tax, but gorcernment will charge you interest and penalty so you end up paying more compared to employee

When it comes to claiming expenses, companies pay for general expenses used by employees, so nothing comes out from their own pocket; but self employed person actually need to spend the money to get lower tax (for instance, lets say 100 dollar worth of supply is used; if its used by the employee, nothing comes out from his pocket; self employed person? Spent 100 bucks and end up saving 30 bucks (assuming its 30% tax rate to simpify) you still end up losing 70 bucks as self employe

So there is basically no benefit at all for being self employed other than u pick ur own hrs
This is correct for self employed
I ran an incorporated operation for over 25 years
Even thats funny if small the honeymoon with government and write offs over soon!
Cambridge,Ontario
Deal Guru
Feb 9, 2009
11259 posts
9750 upvotes
Im self-employed and make far more money then when I was working for someone else.

The richest men on Earth dont work for others, they own businesses/real estate, etc.

Only the last 20 years or so have top level CEO's etc really hit the jackpot. Or athletes... otherwise to break through and be any kind of success you gotta do it yourself...

Trade offs yes.. it's all about whats your passion anyways...
Member
Feb 8, 2017
459 posts
258 upvotes
Chickinvic wrote: I agree with what the accountant said. Also, if self employed you pay twice the CPP.
and EI as well. i know self employed can deduct expenses from income but the CPP/EI hit is quite a bit extra taken from you vs an employee.
Sr. Member
Nov 6, 2015
958 posts
560 upvotes
Guelph, ON
aubgray1 wrote: and EI as well. i know self employed can deduct expenses from income but the CPP/EI hit is quite a bit extra taken from you vs an employee.
Self-employed don't pay EI.
Deal Fanatic
Sep 23, 2007
5061 posts
1159 upvotes
blindemboss wrote: Recently started a new job after a long time of being a self-employed freelancer.

There are advantages of a full-time job with regular paycheques vs hustling for work (although no job really is secure).
But the amount of taxes taken off the top of each paycheque is staggering!

Sure there are some other perks such as health benefits, but I suspect there are plans for the self-employed now.
At least as a self-employed individual, you can defer paying taxes till the end of the year. Plus you can claim expenses to lower your tax rate.
While I'm grateful for having a fulltime job, I'm kind of questioning if I made the right choice going back.
The primary factor would be how much business you can take in as a freelancer. Some people are just better at getting their name out there and selling services to others. I guess if you took on a full time job after being freelance, your business didn't make enough? You call it freelancing so I guess you were just working independently? I don't know what you do but you can turn it into a business if you hire more people to work with you. You can use more human resources so you can take more jobs and make more money (hopefully more than offset the additional costs).

About health benefits, it's a misconception that full time = health benefits. There's no law stating that a company must provide health benefits to full time employees. There actually isn't even a legal definition for what constitute full time vs part time. Case in point, I'm an employer of a small business and I don't provide any health benefits to myself or any staff. I don't have a strict definition of who is part time or full time as everything is shift work. When it's busy maybe you get more hours. When it's quiet we schedule less. I've done a few government surveys and they define full time/part time differently. One government agency might define full time as over 30 hours. Another said 20 hours or less is part time. To the CRA, they only care about gross salaries as CPP/EI is based on gross. The hours you work is only of interest of the Ministry of Labour. You're thinking the regular medium-large corporations. Yes they generally would have health benefits package because it's quite economical to get a group package. Just pointing out that health benefits is not an intrinsic perk of being an employee, whether full time or part time. Likewise there is no law preventing a contracted employee from receiving benefits.

About taxes, there are certainly benefits to incorporating. But there are often misconceptions about what you can do. I often hear about people "claiming expenses". Well yes and no. You can claim reasonable BUSINESS related expenses. Anything that might be deemed not for business activity can be denied. And I always tell people that you wouldn't spend EXTRA money on something useless just to lower your taxes. Like you wouldn't buy 2 tons of bricks just for the sake of not paying tax. The money you spent on those useless bricks could have been largely pocketed and you let the CRA take a portion. If you're spending extra just to pay less tax, then you need to rethink what you are spending for. You should only spend what you need to spend. Think about how much money you can spend eating out. You shouldn't be buying extravagant dinners just for the sake of lowering taxes. If you claim for an expense that you would have spent anyways, that's good.

The ability to hold money in your corporation is certainly useful but if your income is high enough, you are expected to make periodic installment tax payments. Monthly or quarterly. Don't forget the administrative hassles of owning a business, whether you incorporate or not.

Your age matters too. If you're getting older, you may be interested in a more stable life. Chances are good you've made the right choice. I know first hand running a business is stressful.
Member
Oct 12, 2016
309 posts
73 upvotes
Factors to consider when deciding which one is better IMO:

  1. Your income - If a self-employment role pays significantly more then a permanent role then I'd prefer self-employment. At the end of the year you can leave some portion of your earnings in the corporation and invest it in an asset for the business that will appreciate over time.
  2. Your industry - If you work in a volatile sector where a permanent employee is just as secure as a contractor when the economy goes peer shaped then self-employment is better. At least you can bag more money while you are at it.
  3. Your age and family situation - If (i) you are young and healthy, (ii) your family has no medical needs and, (iii) you can easily relocate where work takes you then definitely go for self-employment. Contracting/consulting roles give you much better exposure and strengthen your resume which means better earning potential in the future.
Penalty Box
Jun 24, 2015
4955 posts
1492 upvotes
0 downvotes
its easier to get a mortgage when you work for a proper full time company vs self employed. self employed or contract or sole proprietor have a much harder time getting a mortgage to buy a house, trust me,
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