Do you own a business?
A business is an activity that you do for profit or with a reasonable expectation of profit. Earned income from this type of activity is business income. Employment income is not business income. A business can either be incorporated (a corporation) or not incorporated (an unincorporated business).
Unincorporated business
There are two main types of unincorporated business:
1. Sole proprietorship - This is owned by one person. Income or losses from a sole proprietorship are reported on an individual income tax return.
2. Partnership - This is an association between two or more people who join together to carry on a trade or business. Each partner also has to report his or her share of partnership income or loss on an individual tax return. A partnership with six or more partners in a fiscal period has to file a partnership information return.
For details on how to file a partnership information return, see the Guide for Partnership Information Return (T4068). To get forms or publications, visit our Web site at www.cra.gc.ca/forms, or call 1-800-959-2221.
An individual who owns an unincorporated business may have to pay income tax by quarterly instalments if the estimated amount owing is more than $2,000 ($1,200 in Quebec) and in either of the two immediately preceding tax years the net tax owing was more than $2,000 ($1,200 in Quebec).
If you are self-employed, you have to file a 2005 individual income tax return on or before June 15, 2006. If you owe tax for 2005, you have to pay the balance owing by May 1, 2006, regardless of when you file the return.
Corporations
A corporation is a separate legal entity. A corporation is set up by filing an application with the appropriate provincial, territorial, or federal authority. Corporations have to file a corporate income tax return each year, no later than six months after the fiscal year-end.
Corporations generally have to pay income tax in monthly instalments. A corporation's tax payable is usually due two months after the fiscal year-end.
For more information on corporations and filing options, see our T2 Corporation - Income Tax Guide.
For more information on paying corporate income tax in monthly instalments, see our Corporation Instalment Guide. To get forms or publications, visit our Web site at www.cra.gc.ca/forms, or call 1-800-959-2221.
For information on Making Payments, visit our Web site at www.cra.gc.ca/tax/payments/menu-e.html.
This document is also available for download in .pdf format.
