Beware the rules that apply to incorporated employees – The Globe and Mail
Incorporated employees are those who may “reasonably be regarded as an officer or employee of the hirer, but for the existence of the corporation,” and they (or a related person) owns 10 per cent or more of the company providing the services. They used to be able to get away with not paying personal taxes because the company paid them. However, the rules were changed in 1981 when PSB rules were enacted. If the PSB rules apply to you, you can avoid any penalties by taking certain steps like paying yourself a salary as an income as well as hiring over five people to work in your corporation. You can also avoid PSB penalties by keeping any receipts that prove you are an independent contractor, including use of personal equipment and avoiding accepting employee benefits.
“If your corporation employs more than five people, you’ll avoid PSB status, and the nasty tax implications.”