Insights & advice
Things to consider before becoming self-employed
May 2022 – 15 min read
Key takeaways
You’re self-employed if you contract with a business rather than getting a salary from an employer
Being self-employed has many distinct advantages and disadvantages
There are several signs you might be ready to become self-employed, and steps you can take to get there

What it means to be self-employed
Being self-employed means working for yourself and earning income by contracting directly with a business, rather than working for a specific employer who pays you a regular salary.
Types of self-employment include:
- Independent contractors – Anyone who is in business for themselves, including freelancers and gig workers
- Sole proprietors who own their own unincorporated business or 2 or more partnersOpens in a new window who create a business together
Advantages of self-employment
- Powerful feeling of being “your own boss”
- Opportunity to work at what you’re passionate about
- You manage your work schedule, choose your projects and workload
- You have more control over your earning potential
Downsides of self-employment
- You have to manage your own income taxes rather than have them deducted from your salary by an employer. This takes discipline to regularly save a portion of your earnings to pay taxes and keep track of your expenses.
- You don’t receive paid vacation or sick days.
- Your income may not be as consistent as a salary. It may go up and down with the amount of work you have.
- You won’t have health and dental benefits unless you purchase your own.
- You’ll be responsible for own retirement savings, rather than relying on a group savings plan or a registered pension plan.
- You’ll be responsible following up on creditors who may be late paying you.
Steps to take before becoming self-employed
Create an emergency fund – It may take a while to get your self-employment gig off the ground, so you should have saved enough money for 3 to 6 months of expenses. This fund can also provide financial security in case a creditor delays paying you.
Start your new venture in your spare timeOpens in a new window– Find out how whether you’re cut out to work for yourself and start building your network of client.
Create a workspace – It’s important to have a dedicated workspace so you can concentrate and create work-life balance when you’re not working.
Signs you’re ready to become self-employed
- You want more flexibility and to create your own schedule
- You want more control over your work or feel your ideas are being overlooked
- What you’re passionate about isn’t what you’re working at now
- You have a support system of friends and family who understand your decision and encourage you
- You’re disciplined and take initiative
- You’re able to separate your work life and private life to help avoid burn out
- You’re resourceful and don’t mind wearing many hats and solving your own financial, technical and business problems
What’s next?
Now that you understand more about becoming self-employed, you may want to contact your advisor to:
Create a savings plan for an emergency fund and to pay your income tax when you become self-employed
Learn more about personal health and dental insurance
Create a retirement savings plan
The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.