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, go to Interpretation Bulletin IT-459, Adventure or Concern in the Nature of Trade.

Note

For the purpose of this section of our Web site and for other reporting purposes, we treat professional activities as a  separate business category.

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 on the tax exemption under section 87 of the Indian Act, Business income.

Business income includes income from any activity you do for profit. For example, the income from a service business is business income.

Note

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).

For more information about penalties, go to Penalty for failure to file an information return by the due date.

You must start reporting your income and can start deducting your expenses when your business starts. We look at each case on its own merits. Generally, we consider your business to have started whenever you begin some significant activity that is a regular part of the business, or that is necessary to get the business going.

Suppose you do research on how to start a business in the hope of going into a business of some kind. We would not consider that as a significant activity that is a regular part of the business. So we would not consider your business to have begun at the time you started doing research. In that case, you cannot deduct any of the costs you have incurred for research.

Suppose you decide to buy enough goods for resale or equipment to start your business. We would consider this to be the starting point of your business. You can usually deduct all the expenses you incur for the business from that point on to earn income. You could still deduct the expenses even if, despite all your efforts, your business ended.

For more information about the start of a business, see Interpretation Bulletin IT-364, Commencement of Business Operations.

Statistics Canada is allowed by law to get business information collected by the Canada Revenue Agency (CRA). Statistics Canada can share the data with provincial statistical agencies to use for research and analysis purposes only. The data is related to business activities carried on in their respective province.

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