Can I be employed part-time and work from home as self-employed in the evenings at the SAME time?
By Julie King | October 29, 2011
Can I be employed part-time with another company in the morning and work from home as self-employed in the evenings at the SAME time? Do I need to register as self-employed if this will initially be just a 1-2 months trial? What expenses can I claim as self-employed? What happens if after 1 month trial, I decide not to proceed working from home?
Julie King answered:
First, let me recommend that you go online and read our new In-Depth Guide for Independent Contractors in Canada. We have addressed some of your questions there, and also talk about a few questions you haven't asked yet, like when do you have to charge GST/HST/RST?
You asked four specific questions, let me break them down.
1) Can I be employed part-time with another company in the morning and work from home as self-employed in the evenings at the SAME time?
Yes, absolutely. This is a great way to start a business as you will have income from your part-time work. Jeremy Gutsche from Trendhunter.com talks about how he started his business working in the evenings in video interview he did with CanadaOne:
My only caveat would be that you'll need to make sure that your self-employed work doesn't violate any terms you have agreed to in your part-time job. (For example, a designer wouldn't normally be allowed to do freelance work for company clients after hours.)
2) Do I need to register as self-employed if this will initially be just a 1-2 months trial?
Generally speaking, no.
Although the exact laws for registering a business vary from province to province, you should be fine if you operate your business under your exact name. However, if you want to enhance your name, even just adding one word like John Smith & Associates, you do need to register the name. Once again, the registration rules are different for each province and territory. Step 4 of our Starting a Business Guide has links to articles that describe the registration process in most places in Canada:
3) What expenses can I claim as self-employed?
This on its own is a big question!
To answer it simply, when you buy things like phone service, office supplies, heat/hydro, which are "used up" during the business year so that you can operate your business, you can claim those things as expenses. Things that are used by the business over one or more years, like a desk or vehicle, are given an amount that can be deducted each year.
You should be able to write-off part of your rent/mortgage interest, heat/hydro/phone, postage costs, etc and depreciate some things like furniture. (Another topic I won't get into here is how to deal with personal assets, for example a computer, that you are going to essentially give to the business.)
Also, be very careful in claiming costs for things that will improve a home you own, as this could affect your capital gains exemption when your house sells. You'll want to get professional advice if you are in this situation.
Once again, our In-Depth Guide for Independent Contractors in Canada gives a good overview of how the money side of things works and has links to other articles on the topic, like Help! What Taxes Must I Pay? Our Money Guide also has a lot more information as well and is a great resource once you have addressed the basic issues.
4) What happens if after 1 month trial, I decide not to proceed working from home?
If you start things simply, then it will be easy to end as well. Let's say you work for one month and have $1000 in revenue and $350 in operating and start-up expenses. You would still be required to keep proper records and report your net profit/loss on your tax return. On your Canada Revenue tax return, there are five categories of self-employment income (lines 135 to 143) you can choose from to input your self-employed earnings:
- Business income
- Professional income
- Commission income
- Farming income
- Fishing income
You would select the one appropriate for the self-employment work you do and report your overall profit/loss on the main tax return. Each category also has a corresponding form you fill out to help you calculate your self-employment earnings.
This isn't as complicated as it may seem at first and if your business is fairly simple you can use tax software or get help from a tax professional for a reasonable fee. There may also be a business centre in your area that has inexpensive or even free seminars that can help you understand the money side of running a business. (Make sure you find out when you need to register for the GST/HST, a topic that's addressed in many places, including Demystifying the GST/HST)
I hope that helps answer your questions. If you've found value in our free Ask the Expert service, please help us out by telling your friends about CanadaOne.com!