Did you start your own business last year? Or earn a few extra dollars from ridesharing? From freelancers to multi-million dollar corporations, any income generated by a business must be declared at tax time. How your business income is reported depends on how your business is set up.
If your business is incorporated, your business income is declared on a T2 corporate income tax return. Because corporate return cover only the business’s income and expenses, you’ll also need to file your usual personal tax return.
Sole Proprietorships and Partnerships
No need for a separate return for sole proprietors and partnerships. If your business is not incorporated, your business income is included on your personal T1 tax return. In addition to income and expenses, other information about your business is required. This includes the name and address of the business, which can be your name and home address if you haven’t registered for a Business Number.
The information you enter about your business transfers to the form required by the Canada Revenue Agency (Form T2125 – Statement of Business Activities). If you have more than one business, don’t combine them into one – a separate T2125 form is required for each business.
Find Your Industry Code
No matter how your business is set up, you’ll need to an Industry Code. Industry codes are 6 digit numbers assigned by Stats Canada that used to categorize your business’s main activity. For example, if you’re a freelance writer, your business’s industry code is 711500 – Independent artists, writers, and performers.