Sole proprietorship not eligible for CERB?

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Apr 9th, 2020 3:49 pm

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Apr 3rd, 2020 6:00 pm

wing0 [OP]: Deal Addict; Mar 20, 2004; 3952 posts; 868 upvotes; Mississauga

Apr 3rd, 2020 6:00 pm

Sole proprietorship not eligible for CERB?

I tried to read through the eligibility for both the $2000/month and the 75% wage subsidy. I just want to verify that I am reading it all correctly.
If an individual owns a sole proprietary business with no employees and pays tax through individual tax account.

They are not eligible for the wage subsidy as they don't pay themselves a wage nor the $2000/month as they only experience reduced revenue/income for the time being?
Hypothetically, if they want to be eligible for the $2000/month, even with the current reduced revenue, suspend the business entirely to drop income down to zero?

Thanks in advance.

30 replies

Apr 3rd, 2020 6:27 pm

CensoredByRFD: Deal Addict; Nov 17, 2004; 2812 posts; 1049 upvotes

Apr 3rd, 2020 6:27 pm

Since you're a sole proprietorship, then technically there is no point in time that you're not paying yourself an income since all the money that your "company" makes is taxable income to yourself.

https://www.canada.ca/en/department-fin ... bsidy.html

At the moment, according to the wage-subsidy info, you would qualify since it applies to individuals as well as long as your revenue has dropped by 30%.

Where it would get interesting is if you have a full-time job on the side and this is a side business. I think that you would then not qualify, and if you did and got audited, would have to return your subsidy.

Come on over to this thread for more discussion and information: government-relief-businesses-non-profit ... y-2364470/

+1

Apr 3rd, 2020 7:00 pm

Pronoia: Jr. Member; Apr 2, 2020; 191 posts; 73 upvotes

Apr 3rd, 2020 7:00 pm

My understanding is that you wouldn't qualify for wage subsidy as it only covers employees but you would qualify for CERB as long as you don't have any income and you've earned at least $5,000 in the last 12 months.

+2

Apr 3rd, 2020 7:11 pm

wing0 [OP]: Deal Addict; Mar 20, 2004; 3952 posts; 868 upvotes; Mississauga

Apr 3rd, 2020 7:11 pm

Pronoia wrote: ↑ My understanding is that you wouldn't qualify for wage subsidy as it only covers employees but you would qualify for CERB as long as you don't have any income and you've earned at least $5,000 in the last 12 months.

This is from the website.
- Who have stopped working because of COVID-19 and have not voluntarily quit their job;
- Who are or expect to be without employment or self-employment income for at least 14 consecutive days in the initial four-week period. For subsequent benefit periods, they expect to have no employment income.

So essentially stop working now?

Apr 3rd, 2020 7:33 pm

Pronoia: Jr. Member; Apr 2, 2020; 191 posts; 73 upvotes

Apr 3rd, 2020 7:33 pm

I believe so. I just listened to a Webinar from CFIB earlier today. You only qualify for CERB if you have no income.

Apr 3rd, 2020 9:00 pm

techfox: Sr. Member; Apr 2, 2009; 901 posts; 189 upvotes; Markham

Apr 3rd, 2020 9:00 pm

To clarify you do have a full time job without interruption during COVID, but your side business gets interrupted where the income goes to $0, you won't qualify for CERB?

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Apr 3rd, 2020 9:19 pm

wing0 [OP]: Deal Addict; Mar 20, 2004; 3952 posts; 868 upvotes; Mississauga

Apr 3rd, 2020 9:19 pm

techfox wrote: ↑ To clarify you do have a full time job without interruption during COVID, but your side business gets interrupted where the income goes to $0, you won't qualify for CERB?

From my understanding the $2000/week is for those that have lost their job or sole income temporary/permanently.
So if your side business is not doing well, but you still have a fulltime job, you're not in this category.

+1

Apr 3rd, 2020 11:59 pm

bargainhunter99: Jr. Member; Oct 8, 2010; 191 posts; 44 upvotes

Apr 3rd, 2020 11:59 pm

It's essentially the EI program for people on contract work that don't pay into EI or if you haven't worked long enough to qualify for EI. If you have the option of EI or CERB calculate the difference to see which one pays more.

Employment Insurance (EI) usually gives you 55% of your previous income, up to a maximum of $562 per week. Which is $1,021 a week. So you could max out at $2,248 with EI or $2,000 with CERB in a month.

Program is great for anyone in the entertainment industry such as actors, djs, contractors, uber, hair stylists, etc. who have made at least $5,000 in the last 12 months and can't work now.

+1

Apr 4th, 2020 12:36 pm

dazz: Deal Fanatic; Dec 10, 2004; 6554 posts; 2243 upvotes; Vancouver

Apr 4th, 2020 12:36 pm

techfox wrote: ↑ To clarify you do have a full time job without interruption during COVID, but your side business gets interrupted where the income goes to $0, you won't qualify for CERB?

It would only makes sense for government NOT to give any money for people who still have a job so it's my understanding you would not qualify. The whole point of the government help is to help those who have no income. I think at this time a lot of people are thinking how they can "milk" the system, which will come to bite in the end with taxes, more audits,etc. Governments don't just give free money, not unless you are completely poor(eg, welfare) though, even then there are rules, just like with EI.

I use voice typing, expect mistakes...

Apr 4th, 2020 6:44 pm

DentDude: Member; Aug 13, 2003; 425 posts; 261 upvotes; Calgary

Apr 4th, 2020 6:44 pm

Pronoia wrote: ↑ My understanding is that you wouldn't qualify for wage subsidy as it only covers employees but you would qualify for CERB as long as you don't have any income and you've earned at least $5,000 in the last 12 months.

So the qualification for CERB is that you have no income but what if it is your business has no "net" income. Let's say you have a business that was forced to close down by order of the government. In a month you happen to have a few over the phone sales of $800 but this is not your usual way of selling. There was still your rent, heat, cost of goods, etc. that was $6000. The net income for the month was negative $5200. That technically works out to no income too, doesn't it? You only have "income" if your revenues exceed your expenses.

Apr 4th, 2020 6:49 pm

andrew4321: Deal Addict; Sep 19, 2009; 2069 posts; 867 upvotes; Toronto

Apr 4th, 2020 6:49 pm

DentDude wrote: ↑ You only have "income" if your revenues exceed your expenses.

That is not correct. A business can pay salaries without having any sales (or income).

+1

Apr 4th, 2020 6:57 pm

DentDude: Member; Aug 13, 2003; 425 posts; 261 upvotes; Calgary

Apr 4th, 2020 6:57 pm

andrew4321 wrote: ↑ That is not correct. A business can pay salaries without having any sales (or income).

I know that the definition of self employment income is not clarified when looking at the CERB eligibility but I am thinking that it should be net. This has nothing to do with paying salaries. The CERB is to make up for lack of an income and I think no net income is in essence, no income.

Last edited by DentDude on Apr 5th, 2020 2:54 pm, edited 1 time in total.

Apr 4th, 2020 7:14 pm

andrew4321: Deal Addict; Sep 19, 2009; 2069 posts; 867 upvotes; Toronto

Apr 4th, 2020 7:14 pm

DentDude wrote: ↑ The CERB is to make up for lack of an income and I think no net income is in essence, no income.

That is not what Bill C13 says. You sell your motorcycle on ebay for $5000, the same price you bought it for one week earlier, and you meet the $5000 income criteria.

Apr 4th, 2020 7:26 pm

DentDude: Member; Aug 13, 2003; 425 posts; 261 upvotes; Calgary

Apr 4th, 2020 7:26 pm

andrew4321 wrote: ↑ That is not what Bill C13 says. You sell your motorcycle on ebay for $5000, the same price you bought it for one week earlier, and you meet the $5000 income criteria.

And that seems completely unfair for meeting the eligibility of $5000 income for CERB. If that was your source of income selling motorcycles, you would pay no taxes at all on that amount as that would be a net of $0 for that sale and would be reported as such. I would think the CERB $2000 a month is supposed to help with someone's personal daily living expenses, rent, food, etc. Having no net income or even more likely, a loss, in your business because of a forced closure or severe limiting restriction of services would mean no money for the rent, food, etc. for that individual or family.

Apr 4th, 2020 7:51 pm

Pronoia: Jr. Member; Apr 2, 2020; 191 posts; 73 upvotes

Apr 4th, 2020 7:51 pm

"Who are or expect to be without employment or self-employment income for at least 14 consecutive days in the initial four-week period. For subsequent benefit periods, they expect to have no employment income."

I bet the government hasn't decided if "self-employment income" is net income or gross income. It's next to impossible to accurately calculate net income over a 14 day period.

Apr 5th, 2020 12:49 am

adeel: Deal Fanatic; Aug 21, 2007; 5592 posts; 497 upvotes; Markham

Apr 5th, 2020 12:49 am

I think it’s fair to assume that self employment income will be looked at on a net basis...you only have income from self employment if you have something left over on a net basis. If you have tiny bits of revenue but fixed costs like rent pretty sure still will be eligible.

Apr 5th, 2020 12:47 pm

Pronoia: Jr. Member; Apr 2, 2020; 191 posts; 73 upvotes

Apr 5th, 2020 12:47 pm

You're probably right. But I'm curious as to how a business owner can show they had no net income over a 14 day period. It's not a simple calculation, and the government loves simple calculations.

Apr 5th, 2020 8:16 pm

Kyaku: Deal Addict; Jul 7, 2008; 1197 posts; 685 upvotes

Apr 5th, 2020 8:16 pm

Pronoia wrote: ↑ You're probably right. But I'm curious as to how a business owner can show they had no net income over a 14 day period. It's not a simple calculation, and the government loves simple calculations.

very simple, I own a bed n breakfast and between the months of November till April business is dead. No joke maybe three bookings total during those months.... And they've shut down hospitality besides campsites and approved hotels protocols. So for me to show my income my last booking was November and all my April - September bookings all been cancelled and refunded. Bookings are usually paid upfront, so refunds came directly out of my account. Which that balance I used to survive the quiet months of the year, costs on hydro are 1.8k per every two months during the winter.... So I'd say there are some special cases out there....

Apr 5th, 2020 9:18 pm

Pronoia: Jr. Member; Apr 2, 2020; 191 posts; 73 upvotes

Apr 5th, 2020 9:18 pm

Kyaku wrote: ↑ very simple, I own a bed n breakfast and between the months of November till April business is dead. No joke maybe three bookings total during those months.... And they've shut down hospitality besides campsites and approved hotels protocols. So for me to show my income my last booking was November and all my April - September bookings all been cancelled and refunded. Bookings are usually paid upfront, so refunds came directly out of my account. Which that balance I used to survive the quiet months of the year, costs on hydro are 1.8k per every two months during the winter.... So I'd say there are some special cases out there....

For your case you are right. I was thinking about a business that still generates revenue. It's not a simple calculation that the business had no income for 14 days. What if they had revenue of $50,000 during those two weeks but claimed they had no "net income" because of a one time expense that occurred in January? I don't know the answer.

Apr 5th, 2020 10:22 pm

wing0 [OP]: Deal Addict; Mar 20, 2004; 3952 posts; 868 upvotes; Mississauga

Apr 5th, 2020 10:22 pm

I don't know how to help my relative who owns and operates a small business all on his own.
He still gets tiny orders once in a while to supply grocery stores, but it's nowhere near enough to cover rent and other expenses.
If he stops the business all together, then grocery stores may never order again in the future even if things resume as other competitors can come in and take the shelf space.
So he doesn't fit any eligibility thus far that gov't have announced.

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