Incorporate your business:
This legitimizes your intent to operate your own business independently of the companies you work for. Be advised, though, that a corporation is a separate legal entity, with its own set of obligations for tax filing and tax payments in addition to what you will be required to file and pay as an individual who receives income from your corporation. Your corporation may be required to register for and remit GST, depending upon the nature of your business and its annual revenue. You may also be required to collect and remit provincial retail sales tax.
Maintain your own business premises:
The nature of your work – freelance copywriter, perhaps, or independent tutor – may demand that you provide your services at your client’s place of work. However, your business should have a head office that is not within your client’s premises. You don’t have to run out and rent a space. You may designate a specific area of your home and claim deductions for a portion of the cost of rent/mortgage, heat and even furniture acquisitions relative to the percentage of the home legitimately devoted to your business.
Provide your own equipment:
You should own your computer, your telephone, cellphone and any equipment or tools unique to your trade (brushes, scissors, styling products, etc, if you’re a hair stylist renting a chair at a salon; ladders, drills, hammers, etc, if you are a carpenter; mops, brooms, buckets, cleaning supplies, etc, if you’re an office or home cleaner). You can charge your clients for costs associated with the use of this equipment and deduct your costs from your gross sales.
Have a written work-services agreement with your client:
This demonstrates the intent on both your parts to maintain an independent working relationship.
Do not accept benefits offered to salaried employees:
As a contractor, you are not eligible for the company pension plan or health and dental benefits. Accepting these as part of your remuneration may disqualify you as an independent contractor. It is possible to write a performance-based bonus into your contract, which is a way for you to receive extra fees based upon your contribution to the success of your client’s business.
Ensure all your invoices come from the corporation, not you personally:
This further establishes the legitimacy of your independent enterprise.
Keep accurate records:
This way, if challenged, you can demonstrate to the CRA that you are operating a legitimate business.
File your taxes on time and pay tax owing promptly:
Don’t give the Agency a reason to keep looking at your tax file.
Employee or self-employed?
Indicators that the worker is an employee:
- The payer directs and controls many elements of work performance (such as what, who, where, when and how).
- The payer controls the worker’s absences, such as sick leave or vacation leave.
- The payer controls the worker with respect to the results of the work and the method used to do the work.
- The payer creates the work schedule and establishes the worker’s rules of conduct.
- The worker must perform the work.
- The worker must remit activity reports to the payer.
- The worker’s activities are reserved to a single payer (exclusivity of services).
- The payer can impose disciplinary actions on a worker.
- The worker receives training or direction from the payer on how to perform the work.
- The worker accepts integration into the payee’s business to have the latter benefit from his work.
- The parties have inserted a non-competition clause in their written contract.
Indicators that the worker is self-employed:
- The worker is usually free to work when and for whom he chooses and may provide his or her services to different payers at the same time.
- The worker does not have to perform the services personally. He or she can hire another party to either complete the work or help complete the work.
- The worker can generally choose the time and the manner the work will be performed.
- The worker does not need to be at the payer’s premises.
- The worker can accept or refuse work from the payer.
- The working relationship between the payer and the worker does not present a degree of continuity, loyalty, security, subordination or integration, all of which are generally associated with an employer-employee relationship.
The foregoing provides only an overview and does not constitute legal advice. You are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained in the context of your own particular circumstances.