What is a business?
A business is an activity that you intend to carry on for profit and there is evidence to support that intention. A business includes:
- a profession
- a calling
- a trade
- a manufacture
- an undertaking of any kind
- an adventure or concern in the nature of trade. For more information, see Interpretation Bulletin IT-459, Adventure or Concern in the Nature of Trade.
For the purpose of this section of our Web site and for other reporting purposes, professional activities will be discussed as a separate category of business.
If any of your income earning business activities takes place on a reserve, some of your business income might be exempt from tax. For more information, go to Information for Indians, Business income.
Business income includes income from any activity you do for profit. For example, income from a service business is business income. However, business income does not include employment income. Therefore, you need to know if you are an Employee or Self-Employed .
Include all your income when you calculate it for tax purposes. If you do not report all your income, you may be subject to a penalty of 10% of the amount you did not report after your first omission.
A different penalty may apply if you knowingly or under circumstances amounting to gross negligence participate in making a false statement or an omission on your income tax return. This penalty is 50% of the tax attributable to the omission or the false statement (minimum $100).
You must know the date when the business can be considered to have started. Generally, we consider your business to have started when it begins some significant activity that is a regular part of the business or that is necessary to get the business going. We look at each case on the merit of its own facts.
For example, you decide to start a merchandising business and you buy enough goods for resale to start the business. At this point, we would consider the business to have started. You can usually deduct expenses you have incurred to earn the business income from that date. You could still deduct the expenses even if, despite all your efforts, the business ended.
As another example, you review several different business prospects in the hope of going into a business. In this case, we would not consider your business to have started, and you could not deduct any of your incurred costs.
The law allows Statistics Canada to retrieve business information collected by the Canada Revenue Agency (CRA). Statistics Canada can now share with provincial statistical agencies, for research and analysis purposes only, data concerning business activities carried on in their respective province.
Forms and publications
- Guide RC4110, Employee or Self-employed?
- Guide T4002, Business and Professional Income
- Interpretation Bulletin IT-459, Adventure or Concern in the Nature of Trade
- Interpretation Bulletin IT-364, Commencement of Business Operations
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