Self-employed, freelancer, contract worker, direct salesperson, small business owner, ride-share operator – what do all of these titles have in common? They all result in business income. If you earn income from any of these activities, the Canada Revenue Agency (CRA) considers you to be the owner of a business.
But I Didn’t Earn Much Money!
It doesn’t matter – there’s no set dollar amount. If you decided that picking up passengers as a ride-share operator wasn’t for you after only 2 fares, you had business income. If you only earned $5 from selling cupcakes at the farmer’s market, that five bucks is business income. Even if you didn’t make a profit after you deducted all your costs, you’re still a business owner according to the CRA.
But I Didn’t Register any Business!
Still doesn’t matter. There’s no requirement to register your business or obtain a business number (except in certain circumstances) to have business income. Many self-employed individuals opt to use their own name as the business name instead. In fact, in all Canadian provinces and territories, you are considered to be operating a sole proprietorship, doing business in your own name as an individual business owner, without even touching a form of any kind.
But I Received a T Slip!
If you received a T4 (Statement of Remuneration Paid) slip, you are considered to be an employee and your employment income is not business income. However, if you received a T4A (Statement of Pension, Retirement, Annuity, and Other Income) slip with amounts in box 20 or 48, you guessed it – you have business income.
Like all income, you have to declare your business income on your income tax return. Even if the business income doesn’t amount to much or if you’re not actually “officially” running a business, details about your venture must be recorded in the self-employment section of your return, using the T2125 – Statement of Business or Professional Activities form.
The good news is that having business income makes you eligible to claim business expenses. See our tax tip What Kind of Expenses Can You Claim for Your Small Business?for details.