Part-time photography business in Canada?
February 19, 2010 11:01 AM   Subscribe

I want to register a business in Canada to support a hobby.

Basically, I am an extraordinarily amateur photographer, and one of 'those people with a new DSLR'. Having said that, I really don't think I have any sort of extraordinary talent or vision, but I'm working at it, and I'm getting better.

Recently I did some portraits for friends, both family portraits and corporate, and I have also sold a few prints of my 'art shots' from my Project 365 blog. In these cases, I only charged for my costs of printing, and that was that. The result of this is that their friends are now asking what I charge and when I will be willing to start doing portraits for them.

I have a ton to learn, but I guess I can produce some reasonable quality portraits, and if people are willing to pay for my time and effort, I might as well try to offset my costs and start writing off some purchases, right? I am strictly looking at on-site family and child portrait work, and possibly limited amounts of corporate portraiture as well, working evenings and weekends.

I expect to buy several thousand dollars in lenses, some studio lighting to go with my strobist gear and a better body over the next few years, so if this business could at least help offset that, it would be a boon. I have a very good full-time job, and I am not interested in a career change, so I'm not concerned about the cut-throat nature of the photography game, this is word of mouth stuff only.

What I would like are some tips or advice on starting a small business in Canada, and some advice about what I can report as loses and for how long before Revenue Canada will have an issue with it. Any other advice about part-time semi-pro photography is also welcome!
posted by WinnipegDragon to Work & Money (6 answers total) 11 users marked this as a favorite
Best answer: This advice is from the perspective of a sole proprietor in Ontario who sells services and accumulates expenses, but doesn't acquire depreciable items or report losses, so someone else will have to chime in on those elements.

Start here: Guide for Canadian Small Businesses (PDF) and Reporting your business income and expenses (PDF).

You're most likely looking at a sole proprietorship, where there are no up-front costs and doing your own taxes each year is still pretty easy. Sole prop still allows you a lot of deductions, including all costs associated with using a portion of your residence as a business (an appropriate percentage of rent; mortgage interest; condo fees; heat; electricity; security systems; etc.). In short: keep track of your invoices, received payments and eligible expenses, do business under your own name rather than a company name, and report your self-employment income and expenses appropriately, along with your T4 income, in your individual tax return every April.

If you expect to be doing over $30k of business a year, you will have to charge GST and pay it back to the government once a year. You will need a business number. One good thing about charging GST: you can credit yourself for the GST you pay for your business expenses and pay that much less back to CRA. (If you do claim those GST credits, remember to deduct that GST from the business expenses you submit with your main tax return. You cannot get credit for the same GST twice.)

If you are concerned about potential liability issues (not likely in your work) or about offsetting taxes to future years by leaving money in your corporation where it's taxed at a lower rate, the additional expense and hassle of incorporating may be worth it. Expect a few hundred dollars to a couple of thousand up-front costs to incorporate, depending if you do it yourself or engage a lawyer. And while some people can confidently do their own corporate taxes, you may feel much more secure with engaging an accountant, which could be an additional few hundred a year. Unless you think you can get big advantages now by incorporating, stay sole prop for now.

This CRA page starts you off with a lot of useful information on sole props. CCA (Capital Cost Allowance) may be something you have to consider, given that you'd be buying expensive equipment that depreciates. Get some professional advice on this the first time around if you can.

One last tip: as a sole prop. you have to pay your taxes from your business in quarterly installments through the year. (Don't worry about taxes from your job: those are taken off at source as usual and you don't have to shift to quarterly payments for all income.) The first two years, CRA lets you decide what you expect your taxes to be and will accept quarterly payments that are somewhat short of the final amount needed, with you making up the difference in April. Your first attempts at forecasting will be all over the place, and even when things are good, there's always an element of uncertainty. But in your third year of business, while you can still choose to pay based on your forecast of what your income will be this year, any underpayments are subject to interest at tax time. So do your best not to underpay starting in year 3.
posted by maudlin at 11:36 AM on February 19, 2010 [5 favorites]

Best answer: Here's another PDF on paying quarterly tax installments.
posted by maudlin at 11:41 AM on February 19, 2010 [1 favorite]

Hey there,

I'm no expert but one of the firs things I'd recommend is not buying a tonne of new gear. I'm a big believer in getting the most out of the gear you currently have prior to investing in more. Camera's are all about the electronics and if I learned one thing over the years, anything electronic you buy today will be worth 50% of what you paid by the end of the week. If you're determined to buy some new toys, I'd invest in lenses which tend to hold their value better.

I'm in the middle of reading an excellent book called Vision Mongers, and it has some ideas about how to start up your own part time photo business. I'd suggest picking up a copy.

I really can't suggest a whole lot about how to deal with CRA apart from the fact you will require a vendor permit (for PST) and a business number (GST). Typically it depends what class your gear falls into and what price points. Some of it you may have to depreciate, others you can deduct immediately.
posted by rooster416 at 11:44 AM on February 19, 2010

Response by poster: Rooster -

I'll be buying the gear for myself anyhow, and it seems worthwhile to try and get some tax benefits out of it. Lenses are priority #1, certainly. I'll look into the book though, thanks!

Maudlin -

Exactly what I was trying to find, thanks!
posted by WinnipegDragon at 11:58 AM on February 19, 2010

What I would like are some tips or advice on starting a small business in Canada, and some advice about what I can report as loses and for how long before Revenue Canada will have an issue with it.

If you are going to be operating under your own name, taking in less than $30,000 per year, and don't want to get fancy and incorporate or anything like that, then you don't need to do anything special to start your business. Just do your thing, keep good records of expenses and income (including things like your home expenses if you use part of your home for your business and your vehicle expenses if you drive for your business), and file your taxes including the business as sole proprietorship next year.

However, it sounds like you might not be planning to ever make a profit from your photography. In order for you to be able to claim a loss on your taxes, you need to be running a business with a reasonable expectation of profit. If you are just hoping to offset some of the cost of photography gear by reducing your taxes, then you should reconsider. I don't think that reducing your taxes in this way is the right thing to do. Obviously, this can be a grey area and is pretty difficult for the CRA to police. You don't want to end up like others who have found themselves in court fighting the CRA about whether or not their business/hobby has a reasonable expectation of profit, so get some professional advice if you choose to go down this road. Also, be aware that the existence of this question wouldn't do a lot for your case that your photography has a reasonable expectation of profit.
posted by ssg at 1:21 PM on February 19, 2010

Response by poster: I should clarify. If it turns a profit, great! I just don't need it as a primary source of income.

I'm just realistic that an amateur part-timer may not see a profit, but I'll give it a shot.
posted by WinnipegDragon at 1:33 PM on February 19, 2010

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