Three main reasons why you should incorporate your business are:
Save Your Money
Shareholders of corporations have limited liability for business risks.
You can use a corporation to save tax or to defer paying tax to a later date because the small business corporate tax rate for the first $500,000 of active business income is about 13.5% compared to the top personal tax rate of about 44% (in BC; other provinces differ somewhat).
Unlike partnerships where partners are usually personally liable for the business acts of their partners, in a corporation shareholders are not personally liable for the acts of the directors, officers or other shareholders (except in certain rare exceptions).
Corporations don't have withholding taxes, CPP or EI deducted by the companies that hire their services.
Improve Your Business Image
Incorporated businesses have a better "image" than unincorporated businesses.
Incorporated companies are more likely to attract investors than a sole proprietor or partnership.
A Canadian corporation is well respected worldwide and is particularly well suited to market goods and services in North America.
Make Your Business More Desirable to Customers
Employers in many business sectors, particularly motion picture and TV production, IT services, and construction, prefer to hire corporations rather than individuals to save money and increase certainty.
Corporations cannot be deemed to be employees as often happens when employers hire individuals as independent contractors.
It is easier to find work if you offer your services as a corporation. Some technical tax rules make this trick work better if you have a number of different businesses that hire your corporation's services (and potentially harmful if you work for only one company).
Customers in North America are often reluctant to buy goods and services from foreign based corporations. If you live outside North America but wish to sell your goods and services here, consider setting up a British Columbia corporation with a virtual office in British Columbia. British Columbia allows 100% of the directors, officers and shareholders of the corporation to be non-residents of Canada (though certain tax and other reporting issues will occur).