In the past few months I’ve had some interesting experiences trying to find someone to provide cleaning services for my offices. While this post is stemming from those experiences, I want to make sure that people understand that I have nothing but respect for those who are in the cleaning and janitorial industry. It is hard, dirty work and is often very thankless. I am just using my recent experiences as an example but there are people confused about this topic in all sorts of business types.
What I’ve run in to lately is the misconception from people about what actually constitutes being a business. For the record, there are different business types. The most common we deal with here at BOIB are proprietorships (businesses owned and operated by one person), partnerships (businesses owned and operated by at least two people) and incorporated companies (they act as an entity all their own and the business name is ending with Ltd., Inc., Limited, Incorporated). I, myself, operate a proprietorship. This means that I am the business and the business is me. Any income I make after I deduct valid business expenses in each calendar year is taxable income to me at the current personal income tax rates. In the case of a partnership, the income after expenses would be split between the partners depending on their agreement when they started it and would also be taxed at the current personal income tax rates each calendar year. An incorporated company runs much differently, as the shareholders must respect that the company is a separate entity and they must take money from their company in the form of being an employee on payroll or in dividends.
So, you’re thinking to yourself. Well, I haven’t gone to any government agency and registered a name, I don’t have a business licence and I just collect cash for payment so I’m not running a business. Guess what? You are very incorrect. Generally speaking, if you are offering goods or services for a fee, you are running a business. You don’t need to have a fancy business name registered to have a business.
Legally, my legal business name is Aaron Reid. I am actually “doing business as” Banking On It Bookkeeping. It’s a name I registered for my own use but as I’m not an incorporated company, I am the business and the business is me. In the City of Powell River, anyone doing business within the city limits is required to have a business licence through the City. Many, many small businesses in town don’t have one, but again, that doesn’t mean they aren’t running a business.
If, you are in fact, offering goods and/or services in exchange for money or something of value and aren’t reporting the income you earn on your income taxes, you are actually operating in the Underground Economy, or as the courts call it, you are committing fraud and tax evasion.