Tax implications on US company for hiring a Canadian sole proprietor

[boatyyo]

Hello,
I am on PR in Quebec. I moved to Canada this year and want the company I work for in US (on H1b) to change my role as a contractor. I have already registered as a Sole proprietor in Quebec. The US company is now worried about having permanent establishment obligation if they hire me as a contractor. They want me to incorporate and have already hired another person in Toronto via incorporate setup. However, as far as I understand, if I'm going to be working primarily for one company 40 hrs/week then I cannot setup an incorporate.

This is the first I heard about the US company having tax obligations on contractor. Since many folks here are working as sole proprietors for US companies, can anyone please share what is the setup with your company?

Thanks!

 

[jclarke99]

I think that perhaps your only legal option is to use a 3rd party (Professional Employer Organization), if the U.S. company is open to that. Of course, this means you wouldn't need to be incorporated. If you go the contractor route, you'll run into a potential legal/tax issue with Revenue Canada (Google "Personal Service Business Canada").