EOR vs Entity in Canada

The right choice depends on three things: how many people you plan to hire, how quickly you need to start, and whether Canada is a long-term market for you.

The short version

Use an EOR if you are hiring fewer than 10 people, need to start within weeks, or are testing the Canadian market before committing. An EOR is the legal employer, absorbs all compliance obligations, and charges a per-employee monthly fee.

Set up a Canadian entity if you are planning 20+ employees long-term, already have Canadian operations, or need full control over the employment relationship. An entity takes 3-6 months to establish and requires ongoing local accounting, HR, and legal compliance.

The 3-6 month timeline reflects real steps: federal or provincial incorporation, obtaining a Business Number from CRA, registering a payroll deductions account, registering for GST/HST, registering with the relevant provincial workers comp board (WSIB in Ontario, WorkSafeBC in BC, WCB-Alberta, CNESST in Quebec), and potentially obtaining industry-specific business licences. Each step has its own processing time, and the legal work for articles, minute book, and share structure adds more. Most companies spend CAD 5,000-15,000 in legal and accounting fees before the first payroll runs.

Side-by-side comparison

Factor	EOR	Canadian entity
Time to first hire	1-3 weeks	3-6 months (estimated)
Statutory employer costs	CPP/QPP, EI, workers comp, provincial taxes	Same
PE risk	Reduced (not eliminated)	Absorbed into entity
Provincial licensing	EOR holds required licences	You manage directly
Exit cost	ESA-minimum notice by province, no entity wind-down	Entity dissolution required
Ongoing overhead	Per-employee EOR fee	Local payroll, HR, accounting

What entity setup involves

For companies considering the entity path, the steps are sequential and each has dependencies:

Incorporation. Federal incorporation through Corporations Canada costs roughly CAD 200 in government fees and takes 1-10 business days. Provincial incorporation is often faster but limits you to one province. Legal fees for articles, minute book, and organizational resolutions typically run CAD 2,000-8,000.

CRA registration. After incorporation: register for a Business Number, open a payroll deductions account (RT account), and register for GST/HST if you have Canadian revenue. The payroll account must be active before the first payroll runs.

Provincial workers compensation. Each province with employees requires separate registration (WSIB, WorkSafeBC, WCB-Alberta, CNESST). Premiums are owed from day one, so late registration creates retroactive liability.

Ongoing obligations. Federal and provincial corporate tax returns, T4 slips and T4 summary each year, annual provincial registry returns, and ongoing employment standards compliance for every province where employees work.

What the math looks like

Statutory employer costs (CPP/QPP, EI, workers compensation, provincial payroll taxes) are the same whether you use an EOR or your own entity. They cancel out of the comparison. The decision comes down to EOR fees vs. entity overhead.

Example: 5 employees at USD 499/mo EOR fee (Plane’s published rate)

• Annual EOR cost: 5 x USD 499 x 12 = USD 29,940/year in fees
• No setup cost, no accounting overhead, no entity wind-down if you leave

Example: entity setup for 5 employees

• Incorporation and initial legal: CAD 5,000-15,000 (one-time, varies by province and legal firm)
• Annual accounting, compliance, and HR overhead: CAD 15,000-30,000/year
• Total year-one cost: CAD 20,000-45,000

At 5 employees, an EOR is almost certainly cheaper. At 20+ employees, the per-employee EOR fee (USD 499 x 20 x 12 = USD 119,760/year) likely exceeds the fixed entity overhead.

Use the entity vs EOR break-even calculator to model your specific situation.

When an EOR makes sense

• Hiring fewer than 10 employees in Canada
• Testing the Canadian market before making a long-term commitment
• Need to hire within weeks, not months

For example: a US SaaS company hiring its first remote developer in Toronto can have them on payroll through an EOR within two weeks at roughly USD 499/mo in fees. The same hire through a new entity would require 3-6 months of setup and CAD 5,000-15,000 in legal costs before the first payroll runs.

• Do not want to manage Canadian corporate income tax filing
• Want a clean exit if the Canadian operation does not work out

When an entity makes sense

• Planning 20+ Canadian employees long-term
• Already have Canadian customers, revenue, or operations
• Need full control over employment contracts, benefits design, and HR policies
• The amortized entity cost is lower than cumulative EOR fees at your headcount

Permanent establishment risk

Using an EOR removes the employer-payroll-account PE trigger, but not all PE risk.

Under ITA s.253, a permanent establishment arises from a fixed place of business in Canada or from an agent who habitually exercises authority to conclude contracts on behalf of the foreign enterprise. The EOR holds the BN and payroll account, so your foreign company has no CRA payroll presence — that trigger is resolved. The contract-authority trigger is not. If your Canadian employees negotiate deals or sign agreements for your company, ITA s.253 exposure exists regardless of hiring structure.

The consequence is a Canadian corporate tax filing obligation and potential tax on attributed profits. Get Canadian tax advice if your Canadian hires have any contract authority.

Related guides

• Best EOR vendors in Canada
• Hire in Canada without an entity
• Entity vs EOR break-even calculator
• EOR cost calculator

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