This is a complex subject and should be discussed in detail with your corporate accountant.
However the primary tax related benefits of incorporation are the following:
Lower income tax rate.
As of February 2021, the corporate tax rate for BC companies is 27%. However, most new companies will qualify for the Small Business Deduction provided they remain CCPCs (see ‘residency’(link) FAQ above), which entitles them to a tax rate of 11%. Compare this with the marginal personal tax rates and it is easy to see why it would be preferential to have business income taxed on a corporate basis. Bear in mind, however, that once income is drawn from the corporation to the personal side, it will be subject to some additional tax, and so the income tax benefit is largely a tax deferral mechanism – unless you have a holding company or other corporate vehicle in place that can hold and invest corporately held dollars for long periods of time.
Access to the lifetime capital gains exemption (LTCGE) on the sale of your business.
If your business grows and eventually becomes worth $1m and you elect to sell the shares in your company for that amount, most of the proceeds of that sale are exempt from tax by virtue of the LTCGE. If you were to sell the same business for the same amount except that it was structured as a sole proprietorship rather than a corporation, you would be taxed on the entirety of that capital gain.
If your business is growing and accruing value, it should probably be incorporated. If you plan to one day sell your business, incorporation is essential.
In addition to incorporation, there are various qualifications that must be satisfied in order for the shares of your company to qualify for LTCGE treatment. You should discuss this with your accountant and lawyer to ensure you are on side.