Archive for the ‘Business’ Category

Want to Give Your Spouse an Interest-Free Loan From the Corporation? Tax Considerations

Friday, March 12th, 2010

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only (and is only current to the date that it was written). If you need legal advice with respect to tax issues, you should seek professional assistance.

So you have a Canadian corporation and you want to give your spouse and interest-free loan? What could go wrong, you say? Well, the tax implications may not make it worth your while.

For starters, s. 15(2) of the Canada Income Tax Act provides that if a person is “connected” with a shareholder of a corporation and receives a loan from that corporation, then the amount of that loan is to be included in that person’s income for the year (and hence tax must be paid on it). Here, the word connected is defined in s 15(2.1) to include person with whom the shareholder does not deal at arm’s length with (which includes your spouse).

What about the interest free part of the loan, you say? Well, under s.80.4(2), the spouse may have to include the amount of interest that would have otherwise been paid in their income tax (and hence pay tax on it): once again, if a person is “connected” with a shareholder of a corporation (i.e. which includes a spouse) and receives a loan from that corporation, then that person will be deemed to have received a taxable benefit (i.e. must pay tax on) equal to the difference of the interest they paid in the year and the interest they should have paid in the year (i.e. a prescribed rate).

Overall, therefore, a shareholder of a corporation who offers his or her spouse an interest free loan could be doing more harm than good: the principal and the interest might end up being included in the spouse’s income for tax purposes.

Please keep in mind, however, that there are other provisions in the Canada Income Tax Act which modify or make these sections inapplicable; it really depends on the particular situation. One such example deals with repayment of the corporate loan within one year. Section 15(2.6) of the Canada Income Tax Act provides that, if the corporate loan to the spouse is repaid by the spouse within 1 year after the end of the taxation year (of the lender/creditor in which the loan arose), then it would not need to be included in the spouse’s income (and hence no taxes would need to be paid). So, the spouse would not need to include the amount of the loan in his or her income and pay taxes on it so long as the loan was repaid within 1 year from the end of the corporation’s taxation year. To better understand this situation, take the following example. A corporation’s year end is August 31. A shareholder’s spouse took out a loan on December 31st, 2008. The clock would not start ticking until August 31st, 2009 and the spouse would only need to repay it by August 31st, 2011 to avoid including it in his or her tax return.

The Canada Revenue Agency Interpretation Bulletin (IT-119R4) on shareholder loans helps explain what is meant by the phrase “series of loans or other transactions and repayments” (found at the end of s. 15(2.6):28. It is a question of fact whether or not a repayment of a loan is part of a series of loans or other transactions and repayments. In most cases, when there are only a few loans or other transactions and a few repayments made during a taxation year of a lender, there is no such series. However, when only one loan or other transaction and one repayment occur in each taxation year of a lender, a series of loans or other transactions and repayments may still be in evidence. This could occur, for example, when a repayment is of a temporary nature, such as a loan that is repaid shortly before the end of the year and the same amount, or substantially the same amount is borrowed shortly after the end of the year. Such a repayment of a temporary nature is not considered to decrease the loan balance in applying subsection 15(2) and paragraph 20(1)(j) to a series of loans or other transactions and repayments.

So if a shareholder’s spouse were to take out a corporate loan and repay that amount before the year end (e.g. August 31st), and then shortly thereafter take out “substantially the same amount” as was repaid before the corporation’s year end, then the Canada Revenue Agency may deem such transactions to be “a series of loans or other transactions and repayments” – for which the spouse will need to include the amount as income under s. 15(2).

Remember, if you need tax and/or business advice, you should seek professional assistance.

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Business Loans FAQ:

Question: How can I raise 2 million dollars to start my own business?
I’m civil engineering and I want to know how can I raise 2 million dollars to start my construction firms. Also is it true start a business like corporation is easier to get a loan? I’m from Canada

Answer: Only if the corporation has ASSETS. Your best bet is venture capital. It s expensive, but could be well worth it. Sites like vfinance are accredited and do all sorts of funding.

Question: Could I get a 150000$ business loan?
I estimated that my yearly profit will be 200000$. This is not just a random number, I calculated it. It is AFTER taxes, and expenses and all that. It would be the net income. So I could pay it off no problem. I have it all on paper (where the loan will be going, how my net income was calculated, expenses etc). I have just turned 18 and I make about 20000 per year. I have a 10% (15000$) down payment set up. I live in Canada if that matters.

Answer: Sorry to burst your bubble, although it will be very hard for you to get a loan for such a large amount. It depends on many different factors. First of all, how is your credit score and history? This is a very important factor in the loan application process. Secondly, do you have a co-signer who will back you up? If so, how is THAT person’s credit score and history? How much debt do have? What kind of business will you be investing in and what will its assets be? Is it a franchise? What are is your current income and the value of your personal assets? How much will you be investing of your own money (10% is not very attractive to the bank). Will you be willing to be sign a personal guarantee? What collateral will you be putting up? What bank will you be going to order to obtain this loan? The loan officer will also examine your level of education, work experience, and your personality/character. Its kind of hard to think that in this kind of economy you can re-pay a large loan in one year and still be up by $50,000 in profit. Businesses are struggling and banks obviously know that, therefore they will be very reluctant which goes against your favor.

Question: What corporation papers are needed at bank?
When my wife & I signed at lawyers regarding our business now becoming incorporated here in canada, there was a legal paper that the lawyer mentioned, that was or could be used for things like bank loans etc. Does anyone know what paper he was referring to?

Answer: Memorandum and Articles of association.

Question: Term Business Loan Canada?
Our company is looking for a term business loan in Canada. Where can we get a term business loan?

Answer: For a term business loan in Canada I would try Rubix Financial.

Question: Business Loan Credit Canada?
I need a business loan. How do I know how much credit my business has? What is a good business loans company in Canada?

Answer: Business credit is based on how well or not your business does or is expected to do, how you manage your business acct ie nsf cheques will lower your business credit steadily. If you’re just starting up a business they will also take into account your personal credit which you should check up on at least once a year to know where you stand and if anything is being reported incorrectly. Also, feel free to shop around at least to find the terms of the business loans, they can be quite different and some banks offer incentives for clients who have their personal and business accts in the same place so they’d be more likely to make you happy.

Question: Wondering how becoming common law in Ontario-Canada affects taxes?
Currently, I am self-employed and own a corporation that I draw a salary from. Together we have 2 children. And in the past I have claimed 1 as spouse and 1 as dependent. Now, if the father of my children starts living with us and we become common law. Then I will lose this feature although I will still continue to deduct both children from my income tax. Just the one will not be claimed as spouse. So, what I am wondering is how big of a deal is this for my tax return this year?

Answer: Check with CRA to see if you would be common-law. If he would be living in a self-contained unit with a separate entrance and no shared rooms, they may consider that you’re not actually living together. On the other hand, they may think it a little fishy and say you’re common law since you’re technically living in the same house.

If he is renting out the basement apartment at at least fair market value, then you would have to claim that as income… meaning more taxes. Plus you would no longer be able to claim the eligible dependant amount since you would technically have a spouse. You could still claim the amount for children born in 1991 or later on line 367 (if applicable) but not a spouse or dependent amount.

You can not claim BOTH amounts for eligible dependent AND spouse. If you have been getting away with it somehow, be prepared to pay back any credits you received for the spouse amount with hefty penalties and interest. Claiming the Spouse amount of Non Refundable Tax Credit for your child is tax fraud.

Question: Business license needed or not?
I have searched high and low all over the internet and cannot find a definitive answer to my question. I am an affiliate marketer and promote products and services of others for commissions (such as clickbank, cj.com, etc…). I work out of my home and as an affiliate marketer I do not have nor store any product or have business traffic in my home. All my activities are done online. Do I need a business license as an affiliate marketer? It would probably be a good idea to let you know that I am located in Alberta, Canada.

Answer: Most of the states – even in Canada — do not require a business license for an affiliate business. Except California which requires every type of business opening in the state to get a business license. Even the Alberta government’s website does not state anything about getting a license for this type of business.

Question: Has anyone conducted business with Interest Financial Services? Are they legitimate or a scam?
I was offered a 300,000 home loan from Interest Financial Services, but they are requiring a collateral deposit of $8,200. I can understand the need for the deposit, since I am high risk with bad credit, but the company wants me to send the money via western union to someone in Canada. I am looking for ANYONE who has done business with this company.

Answer: Scam. Loan amounts are REDUCED by fees. You NEVER pay the fees up front. Scammers hope you don’t know that, offer you fake money and try to get you to send the money via Western Union (it’s untraceable and they can pick it up without ID).

Setup a Small Business in Canada

Tuesday, February 16th, 2010

Setting up a small business in Canada requires determination, motivation, high moral and know-how of the business. Following are the steps you need to follow to start up with small business.

Identify Your Business Opportunity: Identify the best possible business for you from the multiple opportunities. It is important to find where you desire lie to understand your personality type.

Prepare a Business Plan: Business plan is must for any business, a business plan permits you to gain a better understanding of your industry structure, competitive landscape, and the capital requirements. Business Analyst observes that companies with business plan have 50% more profits and revenue than non-planning businesses. Writing a business plan just makes good business sense.

Get Start-up Money: To start any business, capital investment is must. Start-up funds for every business is different depending on type of business selected. Finding the money you need may come from a source you never thought of. In Canada the sources of getting money are following:

Canada Small Business Loan Program:

It helps you with your financing needs. Under this program, the Government of Canada makes it easier for small businesses to get loans from financial institutions by sharing the risk with lenders. Program works following ground:

- Who is Eligible: Business which can carry profit with gross annual revenues $5 million or less.

- Who is not eligible: Business which does not fall under Canada Small Business Financial Program is farming business, non-profit organizations, charitable trust and religious organizations.

- How much financing is available?: Provides up to $500,000 of financing, from this no more than $350,000 can be used for purchasing leasehold improvements or improving leased property and purchasing or improving new or used equipment.

- How to apply for Loan?: You need to apply for loan at your bank. If the bank decides to grant you a loan, they register it with Industry Canada. The list of lenders are ATB Financial, Bank of East Asia, Bank of Montreal, Caisses populaires Acadiennes, Caisses populaires de l’Ontario, Canada’s Credit Unions, Canadian Imperial Bank of Commerce, Canadian Western Bank, GE Capital Financial Services, HSBC, Laurentian Bank of Canada, Mouvement des caisses Desjardins, National Bank of Canada, Royal Bank of Canada, Scotiabank, TD Canada Trust.

Note: Agri-Food Canada has a similar program for the farming industry.

Canadian Youth Business Foundation:

- It is a national charity that provides young entrepreneurs.

- Young entrepreneurs from 18 to 34 may get up to $15,000 as a start up capital, with flexible three to five year repayment schedules.

- 2-year mentoring program need to be attended where you are matched up with dedicated business mentors or business professionals.

Business Development Bank of Canada (BDC):

- It is a financial institution wholly owned by the Government of Canada. BDC plays a vital role in delivering financial and consulting services to Canadian small and medium-sized businesses.

- Co-Vision loan can be up to $100,000, which can be repaid over 6 years. If needed, entrepreneurs can postpone principal payments for 12 months.

- Co-Vision specifically targets businesses in the manufacturing, distribution, services and tourism sectors.

- Projects such as working capital, acquisitions, fixed assets, marketing and start-up costs, or the purchase of a franchise can also be financed under Co-Vision.

Name Your Business: What’s in a business name? Find the right name which will distinguish you from your competitors, provide your customers with a reason to hire you, and aid in the branding of your company. Learn what you need to know to find a name for your business.

Select a Business Structure: Deciding on the Business Structure is very important decision; this decision should not be taken lightly. Whether you choose the popular Limited Liability Company (LLC), a sole proprietorship or form a corporation; your choice will have an impact on your business liability, fund-ability as well as taxes due.

Get Your Business License and Permits: Depending on your chosen business structure, may need to register your business with the state authorities. Setting up your small business may require an employer identification number (EIN) which is also used by state taxing authorities to identify businesses. Additional paperwork can entail sales tax licenses, zoning permits and more.

Set Up Your Business Location: One of the multitude of tasks in starting a business is the setting up of your office. There are many steps in office set up including where to locate your office (home or office space), buying the necessary office equipment, designing your work space and getting supplies.

Get Business Insurance: As a new small business owner, you have the responsibility to manage the risks associated with your business. Don’t put your new start-up at risk without getting the proper small business insurance to protect your company in the event of disaster or litigation.

Maintain Accounting System: Unless you’re from accounting or finance background, the accounting and bookkeeping aspect of running your business can’t be avoided. Maintaining your Accounts will help you to understand the financials of running a business and advert failure.

Along with the above you also need to know business legal structures, taxes like GST, PST, Payroll tax and Corporate Income Tax and employer obligations. You can also acquire information from any Business Directory Canada, Online Directory Canada, Yellow Pages Canada or Business Telephone Directory Canada.

Conclusions: There are many entrepreneurs who have lost their everything due to failure in their business. This article will help as a pathway to those who need to Setup a Small Business in Canada.

Ranvir S Bahl is a Director at Canada Business Solutions. An online business directory in Canada helps you to search local businesses information, advertising in Canada, business listing in Canada.

Small Business FAQ:

Question: In Canada, what Government services exist for small businesses?
And are they all provincial government services? Does Ottawa grant money to provincial governments using a Small Business Administration?

Answer: Its mostly tax credits and small business loans for businesses that qualify. As far as I have ever seen there is no such thing as a SBA in Canada.

Question: Where can I get info for taxes for a small Canada home-business?
I have been told with a small business you can claim taxes every 7 years. Where do I find info on this type of stuff?

Answer: You can get info from the CRA (Canada Revenue Agency) website. The guide you are looking for is called Guide for small businesses. However, I do not know who told you about the 7 years thing, but it is wrong. You must file every year and remit GST either monthly, or quarterly, and keep records for 7 years as Revenue Canada can go back 7 years to do audits.

Question: How do I incorporate a small business in Canada (BC) specifically? Is it really expensive?

Answer: I cannot comment on the price of incorporating in BC specifically, but I incorporated a numbered corporation in Ontario for under $600 earlier this year. I did all the legwork to get the PST/GST/Federal Payroll tax account, and provincial tax-type accounts, so I saved a few dollars doing that part.

Question: How to file taxes for a very small business in Canada?
I am in the midst of opening my own dog grooming business out of my home. I do not have a business number or registered name and was told that I don’t have to have one. I do not have a business account because I don’t have a registered business name and was again told that I do not need to have one. I will be making under $30,000 a year and do not need to charge GST.

Answer: As a sole proprietor you will do the same as an employee fill out the T1 tax form but sense you also have self employment/business income you will also fill out the T2125 form and come up with a net income or loss. Like you said you do not have to register your business as long as you don’t have employees, collect GST over $30,000 import or export goods or are incorporated. However you are responsible for adding any profits to your total income for the year and pay the taxes on it. So now is a good time because your income is low. Now is the time to start filling out the form and claiming and keeping receipts for your expenses. On the T2125 form line8521 to 9270 are expenses you can claim.

Question: Can a Canadian citizen do a business in UK and live there with family?
I am a Canadian citizen and living in Canada with my family. I want to start a small business in UK and want to move there with my family. What type of visa do we require? Can I get a loan from Canada or in UK to start a business?

Answer: No you cannot get a loan to start a business. You need to have a business in Canada already so that you can show proof that you already KNOW how to run a business. You need to have several thousand GB pounds saved up and you have to get it legally – it cannot be a loan or a gift

Question: How can I have a credit loan for Small Business in Canada, if I don’t have a good credit history or a property?
My business partner and me want to buy a small business: cafe-restaurant. We have a business plan, a license, a business name and a registered company. The only thing we don’t have is money to buy this business. We’ve looked everywhere: All the banks wants a good credit history or a property. We need $150,000.

Answer: When you made your business plan and business model showing your cost for start up. You should have recognized your situation at that time and taken appropriate action then. You went ahead and did your companies registration premature.

There are companies in Canada that help in these situations. Banks and lending institutions will want a personal guarantee on the loan when your business is less than two years old. After two years the business should qualify on its own without your personal credit.

Question: How do I open a small business in New Brunswick, Canada? And how do I pay an assistant?
I currently provide in home child care and I provide my clients with receipts and year end income tax receipts, I also claim my income on my income tax each year. I am considering hiring an assistant but I’m not sure if I need to have some sort of business number or tax number etc. And I also don’t know how I go about paying this assistant in regards to taking taxes off etc, any help would be greatly appreciated.

Answer: You will need to have a BN. You can open one online, and can obtain the information for deductions online as well. Unless you’re willing to allow the person to have tremendous freedom, it wouldn’t meet the criteria for them to be a self employed/contract person; they’d be your employee. CRA also puts on small business seminars aimed at instructing you on Payroll deductions. They are free.

As a self-employed person (as you know) there is some degree of risk of loss. You have a space dedicated to child care, you advertise to get my clients, you could lose money if no-one signed up. You will likely want control over your relationship with this assistant (you’ll decide their hours of work, you’ll provide their work location, you’ll provide all the toys, food, etc, for the children, all of the clients will be yours, and not theirs, they won’t be allowed to hire a replacement to show up in their stead, etc).

Question: I run an online small business in Canada but it is unregistered. Can I still write off expenses against income?

Answer: Yes you can. Even as an individual you should only have to pay taxes on any income that exceeds your expenses. Keep all your receipts as evidence. You should get an accountant to help prepare your tax return to make sure you have done everything correctly. You may have to register to collect sales tax (GST) if your sales are greater than a certain amount.

Does Canada Revenue Agency Think You Are Self-Employed?

Tuesday, February 9th, 2010

With the economy going the way it is practically everyone is becoming self-employed these days. According to Industry Canada’s Small Business Quarterly, the number of self-employment workers increased by 40,000 to 2.633 million from 2008 to 2009, an increase of 1.5 percent. But are you really self-employed? Yes, of course the guy who is paying you tells you, ‘its ok, you are self-employed’. He calls you a contractor and even has you sign a contract but does CRA (Canada Revenue Agency) think you are self-employed. It is an important question to ask yourself because you may end up being reassessed on the basis of your employment status. This would mean some or all of your deduction may be disallowed by CRA.

Employment status directly affects your entitlement to EI (Employment Insurance) and CPP (Canada Pension Plan). If you are an employee, the payer is considered an employer. Employers are responsible for deducting CPP contributions, EI premiums, and income tax from amounts they pay to their employees. They have to remit these deductions along with their share of CPP contributions and EI premiums.

Certain factors have to be considered when determining if you are an employee or self-employed individual. In all provinces or territories except Quebec, the following determine your employment status. When examining whether or not you are an employee or self-employed individual, the key question is whether or not your were engaged to perform services as a person in business on your own account, or as an employee.

The intent of you and the payer when you both entered into the working arrangement is very important. Did the two parties (you and the payer) intend to enter into a contract of service (employer-employee relationship) or did they intend to enter into a contract for services (business relationship)? The best way to show clear intent is to have a written agreement- the terms and conditions of the work to be performed. Note: In a written contract, the parties may state that in the event of a disagreement regarding the contents of the contract, it is to be interpreted under the Quebec law (Civil Code), even though the contract was formed for example in Ontario (Common Law).

Aside from the contract, you have to answer the following questions and if possible answer them in the contract. CRA uses these same questions to determine whether or not a business relationship existed.

What level of control the payer has over the worker

Control is the ability, authority, or right of a payer to exercise control over a worker concerning the manner in which the work is done and what work will be done. If the payer exercises a high level of control (especially on the worker’s daily activities) then an employer-employee relationship may exist. Some of the indicators that the worker is an employee are; the relationship is one of subordination; the payer controls the worker with respect to both the results of the work and the method used to do the work; the payer determines and controls the method and amount of pay; the worker requires permission to work for other payers while working for this payer; the payer determines what jobs the worker will do; the worker receives training or direction from the payer on how to do the work; and the payer chooses to listen to the worker’s suggestions but has the final word. Some of the indicators that the worker is a self-employed individual are; worker usually work independently within a defined framework; does not have anyone overseeing them; free to work when and for whom he or she chooses and may provide his or her services to different payers at the same time; can accept or refuse work from the payer; and the relationship between the payer and the worker does not present a degree of continuity, loyalty, security, subordination, or integration.

Did the worker provide the tools and equipment used?

If you own and provide tools and equipment to accomplish the work or have contractual control of and responsibility for, an asset in a rental or lease situation.

Can the worker subcontract the works or hire assistants?

If you have to perform the services personally and can not send a replacement then you are an employee. So the payer has no say in whom the worker hires.

What degree of financial risk taken by the worker?

If you made a significant investment in the tools and equipment along with the cost of replacement, repair, and insurance may place you at a risk of loss. There must not be any reimbursement by the payer for use of these tools and equipments supplied by the worker. With a risk of loss, you are taking high degree of financial risk.

What degree of responsibility for investment and management held by worker?

You had to invest capital to in order to get the contract. You manage your staff- you hire and pay individuals to help perform the work.

Is there an opportunity for profit by the worker?

You can realize a profit or incur a loss, as this indicates you control the business aspects of services rendered and that a business relationship likely exists.

Let’s look at the above statements from a cash-flow prospective. For example, if John Doe is the employee above and makes $19.31 per hour. His latest paycheck has the following information:

Gross Earnings $1057.22

CPP ($ 46.24)

EI ($ 18.32)

FED Tax ($ 120.38)

Take Home $ 872.28

Now if John Doe was self-employed then this is what his cash-flow would look like:

Gross Earnings $1057.22

Fed Tax ($ 120.38)

Take Home $ 936.84

There is a definite advantage to being self-employed over being employed from a cash-flow perspective. The disadvantage is you have to create your own retirement plan (CPP) and a cushion (EI) in the event of a slowdown or shut-off of revenue.

I believe that it is very important that everyone learn to manage and grow their money in as many ways as possible. I believe the key to do this is found through increasing one’s financial intelligence.

Self-Employed FAQ:

Question: Do I have to start immediately my own business in Canada as ”self employed” person?
Or when I immigrate can I start with a job offer for two years to gain the Canadian experience first before risking with my money? And what is the criteria to select ”self employed” candidates? I am a graphic designer.

Answer: If you read the criteria for self-employed at the Canada immigration website you can see that to qualify for that, you need to be an athlete or a farmer. If you try for an entrepreneur, you would have to have a lot of money and business experience.

You can find other categories on the website that you may try to apply under. The skilled worker requires you to have a job offer now unless you are in one of 38 occupations. Quebec skilled worker doesn’t require a job offer but it’s hard to get enough points for them unless you know french. The provincial nominee programs often require a job offer but you may be able to go in under their investor classes with less money than the federal requirements state.

Question: How does Canada’s GST work for the self-employed?
I am self employed and planning to turn my job into a business. I am wondering, do I charge my “employer” GST, do I pay GST, or what does the GST actually mean to me? I couldn’t figure anything out from the govt website.

Answer: If you are self-employed, you already HAVE a business. Self-employed persons don’t have “employers”, they have “clients”. As a GST registrant, you add 5% GST to your client invoices, collect it from them, and remit it to CRA with your GST return.

Question: Self employed in Canada, confused about paying taxes?
If you are self-employed (no employees, sole proprietorship) in Canada, do you still have to pay CPP and EI? And what’s ITC? So confused!

Answer: If you are self-employed, you fill out Form T2125, Statement of Business or Professional Activities, and attach it to your regular T1 tax return. You will also fill out Schedule 8 and pay CPP contributions on this income.

As a sole proprietorship, you do not make EI contributions, as you do not qualify for unemployment.

ITC are Input Tax Credits. If you are a GST registrant and collect GST on your sales or services, you can claim a refund of GST paid on your supplies. These are called Input Tax Credits.

Question: To apply for the Permanent Residence in Canada as a Self-Employed person
If I got permanent residency with a standard form BUSINESS Immigration-simplified application process implemented as self-employed then when you’re living in Canada find a job offer do I need to apply for a work permit for having implemented as self-employed?

Answer: If you are not going to be self employed you can’t get that visa, you need to be honest and apply for the right visa. Just because the business visa may be easier to get you could be deported for making a false statement on the visa application.

Question: Tax question on a Self-employed American living in Canada?
If you are a self-employed American with income entirely from US sources, but you live in Canada, who do you pay taxes to? US? Canada? Both?

Answer: Both. US citizens pay taxes on worldwide income. And Canadian residents pay taxes to Canada. You will get a credit for the taxes paid to Canada to use against your US taxes, and most likely won’t owe any additional taxes to the US as Canada generally has a higher tax rate than the US (you still have to file a US return).

If it were reversed, and you were a Canadian living in the US, you wouldn’t have to file a Canadian return as only Canadian residents have to file Canadian returns not all citizens as in the US.

Question: If you were to open a small business/be self employed in Canada?
And it was an online based service, no goods involved, in laymans terms would it be better to be INCorperated or COrperate?

Answer: You you will want to be incorporated. If your business will do more than 30,000/year you will require a GST number. If you do less than 30,000 you don’t require a number nor do you charge gst. If you are over the 30k and your service buys supplies you will want to file the long form for your quarter remittance, if your service is just labor without buying anything than it is more beneficial for you to file short form GST. You do not require pst for a service business.

Question: Can you get unemployment benefits/insurance in Canada if you quit your job to become self employed?

Answer: No. Quitting your job makes you ineligible for benefits. Being self employed also makes you ineligible for benefits.

Question: Self- Employed in Toronto, Canada?
I am going to teach ballroom dance on my own, so independently. Am I considered self-employed? Do I have to register to somewhere? Do I have to let anybody know, like tax agency or just at the end of the year? How do I do my taxes? As you can see I have no clue, any help will be great.

Answer: You would be considered self-employed. To do this legitimately, you will need a business number and possibly a GST number (if you think you will be earning more than $30,000 per year).

If you register for a GST number, that means you have to collect GST and you will have to hand a certain percentage of that to the gov’t when you do your taxes. If you do not register for a GST number, you cannot collect GST. However, once you start earning over $30,000 (or project that you will), then you do need the GST number.

You might want to get in touch with other self-employed dance instructors to see what arrangements they have set up, and what tax software or tax accountants they use.