My concern with your reply Matt is that you can readily advise Sarafina to disregard the advice given by qualified advisors without knowing anything about her personal circumstances.

For starters, having a corporation is not the be-all end-all of business. This first thing i would ask you is "how much do you anticipate that your business is going to make in the forseeable future?", and coupled with that "how much are you making from other employment or business interests on the side?". If you are not deriving a significant amount of income from the activities of the business then the costs to establish, and service a corporation may well outweight the benefits. Whether you are a sole proprietor, or a corporation you will have deductible expenses. In this kind of business there is no such thing as before tax and after-tax dollars, because you receive all of your income during the year without paying taxes on it, and subsequently file a return which will indicate to what extent you have to submit payment for taxes. It isn't like getting a paycheque from an employer where a certain portion of your income is withheld to account for the tax liability you will have the following April. As such, any deductions you have (whether incorporated or not) are going to be deducted before any taxes are paid. Corporations don't automatically have more tax deductions than say a sole proprietorship would have (the exception being that they get to deduct the extra expenses they've had to pay out anyway). Matt makes reference to the reduced income tax brackets for canadian corporations. Presently, the combined federal and provincial corporate tax rate for Canadian Controlled private corporations is 18 - 21% on the first $200,000 of active business income. But it should be noted that the combined corporate tax rate, plus your personal tax rate for income received from the corporation is roughly equivalent to what you will have paid if the income had strictly been taxed in your hands (even if it's paid out as a dividend). Comparing a tax rate of 18 - 21% versus 46 - 52% if the income is earned personally is obviously a motivating factor to incorporate. The tax savings obtained by the difference in tax rates can be reinvested in the corporate business, used for investment within the corporation, or distributed to shareholders as a dividend. But to the extent that the income is flowing through to the shareholders immediately, no advantage is achieved by incorporation since the personal tax on the dividend received when combined with the corporate tax already paid will be the same as if the income were earned personally via a proprietorship in the first place. This integration of the tax system is designed to make one "tax indifferent" between carrying on a business in an unincorporated or incorporated form if the profits are to be within the hands of individuals.
**It should be noted however that this only applies to 'active business income'. Investment income is not considered active business income by the CRA and as such is not given the preferential corporate tax treatment, but is instead taxed as if it were earned in the highest tax bracket.**

You should also be familiar with the definition of a personal service business: a corporation created to carry on employment duties previously performed by a specified shareholder of such corporation, or by a person related to such specified shareholder.
Personal service businesses are not entitled to the small business deduction.

I don't know enough about your personal circumstances to advise whether incorporating is appropriate for you or not, but I think you should talk with some bonafide, qualified professionals face to face about what you intend to do, what your current personal circumstances are, and what you anticipate happening down the road before you make the decision whether you will incorporate at this moment or not.

I'm neither an accountant, nor a lawyer, so I would also advise that you contact both to verify the information I've given you...

Dave
(sorry this was so long, but your question is a lot more involved than it appears on the surface).