Personal Finance

Am I now a business?

  • Last Updated:
  • May 20th, 2014 8:34 am
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Newbie
Mar 10, 2014
40 posts
2 upvotes
London

Am I now a business?

Hi All,

So, after a year and a half of hard work, it looks like I will be signing a deal with a large publisher to write a textbook. I am thrilled, and can hardly believe it. Unfortunately, I won't get any time off to write the book (except maybe 2 weeks here and there over the next two years), and will continue to work full time.

My question is, can I also say that I am my own business? In terms of taxes, I would love to deduct part of my mortgage and living expenses. For more immediate pleasure, I would sure love to sign up (legitimately) for some sweet business credit cards.

Can anyone help me out? It's a medical textbook - not an accounting one!
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9 replies
Deal Fanatic
User avatar
Apr 4, 2009
7698 posts
794 upvotes
North York
Can you provide some examples of sweet business credit cards? Especially, for a brand new business, with no credit history.
Sr. Member
Nov 5, 2013
624 posts
122 upvotes
Your particular question is whether u can deduct portion of your mortgage and living expenses. After reading the above CRA publication and going thru those critical factors to qualify as self employed, and assuming for a moment that u think u qualify, the CRA will question u whether your activity has a "reasonable expectation of profit" before u can deduct those portion of expenses. Here is an article from the cdn tax foundation on this subject for u to read:
https://www.ctf.ca/ctfweb/Documents/PDF ... 4_Owen.pdf
Deal Fanatic
Apr 15, 2004
5438 posts
80 upvotes
Sydney
You're going to get audited. Have fun with that.
Newbie
Mar 10, 2014
40 posts
2 upvotes
London
Thanks for the info everyone. I must say I'm a little surprised by the number of snide responses. Really no need to rain on my parade. But to those who answered sincerely, thank you!
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Member
User avatar
Feb 22, 2009
494 posts
122 upvotes
Kitchener, ON
InOverHisHead wrote: Thanks for the info everyone. I must say I'm a little surprised by the number of snide responses. Really no need to rain on my parade. But to those who answered sincerely, thank you!
I too find it odd with the snide responses. I had similar questions and in fact by luck found someone on RFD years back who was also starting a new business and we together learned the ins-outs and helped each other get our respective businesses up and successful. Fun times.

Sounds to me you are/will be earning incoming from a book deal as a one time thing. Doesn't sound like a typical business but just extra income at a specific period in your life. Sure, technically you could report it on your T2125 but CRA has rules about in-home deductions and biz expenses that occur prior to forming that business (in your case spending years to make the book before selling it). My guess is it would be a tough sell to convince them about those deductions when you (assuming) weren't technically dedicating specific parts of your home and other expenses as a business intent until after you made the sale. It's been years since i've looked at my notes on starting a business so my memory is a bit foggy on everything so forgive me if i have anything wrong.

As for business credit cards. It shouldn't be hard. I have several. It depends on which province you live in too. In Ontario you need an MBL License.
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Mar 31, 2009
1219 posts
884 upvotes
Until you've actually earned some revenue, it'd be hard to justify expenses. Expenses must be matched with revenue earned. So if you'd be planning to file a tax return with zero business income and hundreds of dollars or thousands of dollars of expenses, that isn't going to look right to anyone. If you report earnings, then you definitely could justify an office in home type of thing as well as any other expenses incurred directly to earn that revenue.

You could justify keeping track of current expenses related to the business, but not deducting any of them until you report earnings. Again, we're now matching expenses to earnings. which makes it more reasonable.

It sounds like you may just have one year where you have some earnings, or something like that. In that one year it would probably not be reasonable to have a large loss. Relating to the 'expectation of profit' theme, if you're doing all the work for one single payoff and yet you end up 'losing' money on that payoff because you've added up years of expenses that were not reasonable, it'd start to look questionable.

As far as using business credit cards - go ahead. Infact, it would make sense if you got a business credit card and expensed all business expenses on that card until your book is complete. Then when filing taxes with the expenses and revenue, the credit card statements are your audit trail. Credit card companies are not picky when it comes to issuing business credit cards. A lot of people have applied for and gotten business credit cards with 'business' that is less legitimate than yours. Really, there is no harm in getting a business credit card if you want one. Just put your name as the business name.
Sr. Member
User avatar
Oct 24, 2011
623 posts
180 upvotes
Timmins
At this point, you have not written the book, and when you do, it will be only one. So, you are not a business. When you do sell the book, you will have made money on the side. If you write another, or contract to write another, you could then claim to be self-employed and start writing off some expenses (computer cca, ink, etc.) Note: in-home office expenses cannot be written off against zero or negative income at any time, so you would have to wait until you have income to report.

Once you have signed the contract to write this book, keep track of your expenses, as your reasonable expectation of profit starts as of the contract date. The expenses must be applicable to that book only.

If you end up receiving royalties, they get different treatment- http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... s-eng.html

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