Starting Sole-Proprietor Business, Need Tax Advice

[mediajunkie]

I am planning on registering a consulting business in Ontario. For now, I am employed with a company and the business is more of a side venture. For now, I probably going to take on the odd consulting job here and there while I build up my business and contacts. It may likely be dormant for the first year. And I will probably work out of my home.

I don't think I'll be able to pull in much revenue in the first few years as this business will only be a part-time thing. Since I may not making any profits, will I still be taxed?

I understand that things can be written off, such as rent/mortgage for space used for home office, gas used for business travel, entertainment for clients etc. Is it okay if my expenses exceed my revenue and I report a loss for the first couple of years? Will I still have to pay taxes on losses?

Is it okay if I incorporate other sources of income other than consulting into the business as well? e.g. acquiring inventory and it, or selling craft projects on eBay or at fairs, tutoring income, etc. I just want to consolidate all my sources of income (other than my salary) under one business name.

I do eventually intend to fully seek out the services of an accountant but just need some initial advice for now as I am about to register the business and research the business name and was just thinking of these questions.

 

[toby]

I am planning on registering a consulting business in Ontario. For now, I am employed with a company and the business is more of a side venture. For now, I probably going to take on the odd consulting job here and there while I build up my business and contacts. It may likely be dormant for the first year. And I will probably work out of my home.

I don't think I'll be able to pull in much revenue in the first few years as this business will only be a part-time thing. Since I may not making any profits, will I still be taxed?

No; you declare any business income in your personal tax return; if the combines income means there's tax to pay, you pay. There is a lot of literature available on running a small business -- look on the CRA website, or ask one of the major accounting firms for their literature on this topic.

One point I am no longer sure about: can you deduct business losses from your other employment income? Check on this possibility.


I understand that things can be written off, such as rent/mortgage for space used for home office, gas used for business travel, entertainment for clients etc. Is it okay if my expenses exceed my revenue and I report a loss for the first couple of years? Will I still have to pay taxes on losses?

No; only net gains attract tax. If you run losses for a few years -- I THINK you can accumulate them and deduct them from future business income, but I am not sure about this one. Again, CRA literature might help on this point.

Is it okay if I incorporate other sources of income other than consulting into the business as well? e.g. acquiring inventory and it, or selling craft projects on eBay or at fairs, tutoring income, etc. I just want to consolidate all my sources of income (other than my salary) under one business name.

Unless your business is incorporated, all income and expenses are reported in your personal tax return. There are no restrictions on the type or numbers of distinct business you run -- as long as there is a reasonable expectation of profit. If losses were to accumulate for (say) 7 years, then CRA might discount any expenses claimed -- which is why I recall that you can deduct these legitimate business expenses from other employment income. But again, check this point.


I do eventually intend to fully seek out the services of an accountant but just need some initial advice for now as I am about to register the business and research the business name and was just thinking of these questions.

Good luck. I admire entrepreneurs.

 

[alex123]

Yes if you are running own solo business then you have to pay tax for it.It is the basic law for the Canada whoever do business over there he must need to pay the tax.You should consult with the lawyer he will tell you all things related to this.

 

[Jonboy]

To add to what toby posted above:

Yes, you can deduct business losses from employment income in a year (subject to the reasonable expectation of profit test).

In any year you first use business losses (or other non-capital losses) to reduce other income to zero. Any non-capital losses not utilized in this way can be carried back up to three years, or carried forward.