I'm sure there are tax implications, and other things to consider. I don't know where to start.
In short - if you can't get the job without incorporating, then incorporate!
Some clients will require you to be incorporated (which is why I did it 10 years ago). Essentially, for them, it's a way of distancing themselves from you to ensure they are not responsible for any monies if you don't pay your taxes. For you, there is also this idea of distancing company assets from your personal assets. If they are not requiring you to incorporate, you can simply act as a sole proprietorship.
A good place to start reading up could be the sites below (for Canada/Ontario):
When I registered, I simply bought a book at Grand&Toy, with all the required forms for Ontario. These forms would also be available at a local Government service centre. You walk in, give the government money, and shortly thereafter you are incorporated.
There are a number of others things that are required (having a minutes book, writing resolutions, creating shares, setting up a bank account, etc) - all discussed in the guide
For Ontario you can start here: http://www.ontario.ca/en/services_for_business/index.htm
At a high level, there are some costs for being incorporated, and some tax savings. At a minimum, costs would include:
You may need the help of an account to help set things up, but it's quite easy to maintain all the records, etc that are required.
Some other minor things I enjoy are writing myself expense cheques so that I get money back immediately (and effectively only pay 60% of the cost after writing it off in the company). I can decide how much to pay myself and push income from year to year.
Do you need to incorporate? This depends on whether the company prefers you to be incorporated. If you are going through a recruiting company, some of them are willing to deal with non-incorporated people (Sole Proprietor) and withhold taxes from your cheques for you.
If you do want to incorporate, you can do it yourself, go through a paralegal, or you can even do it online. I did mine in Ontario for about $300 (no name search - i just have a numbered corporation like 123456 Ontario Inc.) through www.oncorp.com - there are other sites that do it as well.
Things to consider - if you're contracting through a corporation you most likely need to:
Talk to an accountant about these for clarification - most of them will give you an initial consultation for free. Generally speaking, accountant fees for corporate filing taxes averages about $1000-2000 a year.
I am co-owner of a business, and we incorporated federally. (Mostly to limit liability.) There is some excellent information above, and most of my wisdom I got from a trusted lawyer and accountant (find experts you trust in these two areas, they will prove invaluable in so many areas.)
The one point I would add is that if you decide to incorporate, you can do so federally or provincially. We were all set to go provincially, when our lawyer asked "Is there any chance you might move the business? Any chance you might want to do work in other provinces? What about next year? Five years?" If you are going through the expenses to set up a corporation, consider doing so federally, the extra costs were insignificant, but someday you might be glad you don't have to start from scratch. In this day and age, many people end up moving out of province for work, family concerns, etc.
I know this is a little late but here is my answer.
No. You do not "need" to incorporate. In fact, incorporating in your situation will cost you in legal fees, administrative headaches, and a fair bit in taxes. The CRA would probably look at your corporation as a personal services corporation and it would not be allowed to claim a number of tax reductions. The tax rate would end up being over the top range (unless you are in Quebec where it would be just under the top marginal range).
My late answer is:
Be aware of the difference of being a contractor and being an employee. I am not sure of the laws in Canada, but in the United States lots of small companies like to hire people as "contractors" but make them work under rules that fall into employee.
The business is trying to avoid paying payroll taxes, which is fine, but make sure you know your rights and responsibilities as a contractor vs employee.
You can check with your state's Bureau of Labor and Industry in the US, but I am sure wherever you are from there is a government agency to do the same thing.