Online Business and Taxes

There are certain rules regarding taxation of internet business owners depending on what type of business you own.

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No matter what your online business is, you will most likely fall into these 3 categories:

- Sole proprietor

- Partnership

- Corporation

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As a sole proprietor, the income and/or losses you incur will be included in your personal income tax return. For partnerships, you are able to claim as if you are a sole proprietor but you would only claim your portion of the partnerships income and expenses.  You and your partner would either have a verbal or written agreement on the split.

Internet Businesses

As a sole proprietor, you will file your income and expenses such as home office expense, if you work from home, such as internet service, advertising, office supplies, etc. Sole proprietors will need to fill out Form T2125 Statement of Business and Professional Income that relates to your business.

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If your online business is a corporation, you will need to file Schedule 88 Internet Business Activities with your T2 corporation tax return.

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CRA requires you to list all web pages or websites that you earn income from on your tax return.  If you have websites that don’t earn money then you do not have to report them. CRA will also require you to specify your gross income that you earned from the websites on your return.

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