Using Your Family in Your Self Employed Business and Taxes

Employing family in your business
When starting a new self employed business there is every chance as your business grows that you will need some help with its operation.   If you have a family member that is qualified to assist you then you can utilize their services.   You are entitled to pay them a wage as you would with any other person, and handle the tax obligations accordingly.   This can create some tax benefits for both you and your family member.   Many husbands and wives follow this format.


By doing this be aware that you may now put yourself in a position where you are now the employer and your family member is the employee, and as such you may be required to make payroll deductions.


In some cases, you may be thinking of the family member as being a contractor.   If this is truly the case then payroll deductions are not your responsibility.   This is a grey area with CRA however, and it can be quite complicated according to the individual circumstances as to whether your family member or any other person with similar circumstances will fit into the contractor or employee category.


This is not a mistake that you want to make.   If the CRA deems that this family member is an employee and you have not done the source deductions then you will get hit with a penalty and fines, and plus have to cover all of the deductions that were required.


Using a good accountant for your self employed business will really help to reduce the risk of making such a potentially costly error.   Even with the need for making the payroll deductions you should still find it as a tax benefit for your business, as you are basically keeping the money in the family, and you get to claim the wage or salary as an expense against your business.


If it is determined that your family member is going to be classed as an employee then you will need to apply for your payroll deduction package from the CRA, and follow the requirements.


Even though your business is a small entity there are still a lot of tax obligations and rules and regulations that you must be aware of.   It can be difficult trying to get a new business up and running, plus handle the administrative tax, and learn the applicable tax laws.   You will be surprised to discover how a Toronto accountant can help ease the burden when it comes to knowing and implementing the tax laws that pertain to your business.


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Sam Seidman, CPA, CA, LPA
629 Sheppard Avenue West
Toronto, Ontario
M3H 2S3

Telephone: (416) 398-1700
Fax: (416) 398-6226

Chartered Professional Accountant, Chartered Accountant, Licensed Public Accountant


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The information provided here and throughout the site of TorontoAccountant.CA is intended for general tax information only, and should not be misconstrued as a legal source of information regarding your tax situation, or be used for any other purposes other than for general information.
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