EOR vs Setting Up a Canadian Entity: Complete Comparison

Should you use an Employer of Record (EOR) service or set up your own Canadian corporation? This comprehensive comparison helps you make the right decision for your business.

Quick Comparison

Key differences at a glance

Factor EOR Service Canadian Entity
Setup Time 24-48 hours 3-6 months
Initial Costs $0 setup fees $5,000-$15,000 (legal + accounting)
Monthly Costs $499-$1,500 per employee $3,000-$8,000 annually (compliance)
Compliance Management Fully handled by EOR Your responsibility
CRA Registration Not required Required (payroll accounts)
Provincial Compliance Handled by EOR Your responsibility
Risk & Liability EOR assumes compliance risk You assume all risk
Scalability Easy to scale up/down Fixed costs regardless of headcount
Best For 1-50 employees, testing market, fast hiring 50+ employees, permanent presence, large investments

Detailed Comparison

In-depth analysis of each approach

Setup Time & Process

EOR Service

  • Onboarding in 24-48 hours
  • No legal entity formation required
  • No CRA registration needed
  • Simple service agreement
  • Immediate hiring capability

Canadian Entity

  • 3-6 months for complete setup
  • Legal entity incorporation ($500-$2,000)
  • CRA business number registration
  • Payroll account setup
  • Provincial business registration
  • Workers' compensation registration
  • Bank account setup in Canada

Cost Analysis

EOR Service

  • Setup: $0
  • Monthly: $499-$1,500 per employee
  • Annual (10 employees): ~$60,000-$180,000
  • No hidden fees
  • Transparent pricing

Canadian Entity

  • Setup: $5,000-$15,000 (one-time)
  • Legal fees: $3,000-$8,000
  • Accounting setup: $2,000-$5,000
  • Annual compliance: $3,000-$8,000
  • Annual (10 employees): ~$8,000-$16,000 + salaries
  • Additional costs for HR staff/software

Break-even point: EOR is typically more cost-effective for companies with fewer than 50 employees. For larger operations, a Canadian entity may be more economical.

Compliance & Risk

EOR Service

  • EOR handles all compliance
  • EOR assumes compliance risk
  • Automatic updates for law changes
  • No CRA audit exposure for you
  • Expert compliance team

Canadian Entity

  • You handle all compliance
  • You assume all risk
  • Must stay current with law changes
  • Direct CRA audit exposure
  • Need internal expertise or consultants
  • Penalties for non-compliance

Source: Canada Revenue Agency - Non-compliance can result in penalties, interest charges, and legal issues.

Operational Complexity

EOR Service

  • Minimal administrative burden
  • Single monthly invoice
  • No Canadian bank account needed
  • No Canadian accounting required
  • Focus on business, not compliance

Canadian Entity

  • Significant administrative burden
  • Payroll processing required
  • Canadian bank account needed
  • Canadian accounting required
  • Ongoing compliance management
  • HR administration

Scalability & Flexibility

EOR Service

  • Easy to scale up or down
  • No fixed costs
  • Pay only for active employees
  • Quick to add/remove employees
  • Ideal for testing markets

Canadian Entity

  • Fixed costs regardless of headcount
  • Compliance costs remain constant
  • More cost-effective at scale (50+ employees)
  • Commitment to Canadian market
  • Less flexible for market testing

Legal & Regulatory Requirements

EOR Service

  • No Canadian entity required
  • No CRA registration needed
  • No provincial business registration
  • EOR handles all registrations
  • Simple service agreement

Canadian Entity

  • Canadian corporation required
  • CRA business number registration
  • Payroll account registration
  • Provincial business registration
  • Workers' compensation registration
  • GST/HST registration (if applicable)

Sources: Canada Revenue Agency, Corporations Canada

When to Choose Each Option

Decision factors to consider

Choose EOR Service If:

  • You're hiring 1-50 employees in Canada
  • You need to hire quickly (within days/weeks)
  • You want to test the Canadian market before committing
  • You prefer to focus on business, not compliance
  • You want predictable, transparent costs
  • You need flexibility to scale up or down
  • You want to minimize risk and liability
  • You don't want to manage Canadian payroll and taxes

Choose Canadian Entity If:

  • You're hiring 50+ employees in Canada
  • You're making significant capital investments in Canada
  • You need a permanent Canadian business presence
  • You have specific tax structure requirements
  • You plan to operate in Canada long-term (5+ years)
  • You have internal resources to manage compliance
  • You need specific business arrangements or structures
  • You want direct control over all employment matters

Key Statistics

Data-driven insights to inform your decision

Time to First Hire

24-48 hours

EOR Service

vs. 3-6 months for entity setup

Initial Setup Cost

$0

EOR Service

vs. $5,000-$15,000 for entity

Cost-Effective Range

1-50 employees

EOR typically better

Entity better at 50+ employees

Compliance Risk

EOR assumes

Risk transfer

vs. You assume all risk with entity

Still Not Sure Which Option Is Right?

Our team can help you evaluate your specific situation and recommend the best approach for your business needs.

Get a Free Consultation

Or email us at marc@infradevconsulting.com