Sole Proprietorship/Self- Employed

Business income includes money you earn from a:

  • Profession
  • Trade
  • Manufacture or
  • Undertaking of any kind, an adventure or concern in the nature of trade, or any other activity you carry on for profit and there is evidence to support that intention.

For example, income from a service business is business income. However, business income does not include employment income, such as wages or salaries received from an employer.

If you are self-employed or earning income as a sole proprietor, you can claim business expenses to reduce your taxable income, including:

  • At-home expenses
  • Vehicle costs
  • Meals
  • Office supplies and furnishings
  • Advertising
  • Tools and equipment

…and more.

Your taxable income can be reduced by claiming valid businesses expenses. 

You need to submit an annual tax return that reports the gross income, gross expenses, and net income. If you earn more than $30,000 a year (or four consecutive quarters or a single quarter) you also need to charge and collect GST. Learn more and register for a GST account here.

Your proprietorship or self-employment income is reported along with any personal income on a T1 Income Tax Return. Self-employed individuals, such as sole proprietors, have until June 15th to file with Canada Revenue Agency. However, if you have a balance owing, you will need to pay it on or before April 30th.

Considering incorporation?

Once your business income reaches a certain threshold, you may want to consider incorporating your business. Incorporation can significantly reduce the amount of tax you owe. By incorporating, you may also have potential for tax deferral and/or income splitting. Incorporation also protects your personal assets.

The experts at Smart Tax can assist you in choosing the right option for your business, and can look after all your tax requirements so that you can focus on growing your business.

Contact us to discuss your self-employment or proprietorship tax reporting options and let us help you to determine all the deductions you may be entitled to.