Are you running an illegal business?
You might be and not even know it!
It can be really difficult to figure out when, or if, you need a business license to practice. And to make it more confusing, depending on province and municipality, it can be slightly different wherever you are. To get started the question you need to ask yourself is this:
Are you a sole-proprietor/private contractor or are you an employee?
If you are not an employee, you are going to need a licence. As a general rule, if you are not receiving a pay cheque from a larger company, and instead are generating your own income, you need a business license.
How is a pay cheque different than personal income?
Unless the money you receive already has taxes withheld (such as Canadian Pension Plan or Income Tax), you are considered a private contractor and need a business license, even if you do not have a registered business name with the province because you are practicing under your own personal name. For example, if you have you own private practice and clients pay you for your services, that is personal income – you need a license. This does not change as an Associate working for someone else. If you work as an Associate in someone else’s practice, unless they withhold taxes and give you a pay cheque, you technically are required to have your own business license registered with the municipality where you work. This is because you are receiving a percentage of the total payment instead of a wage. In all cases, each municipality will have certain exceptions so it is better to assume you need one and call your local city hall to determine if that is true. It’s usually a simple phone call and they will be able to tell you right away what your next steps (if any) would be. For those of you located in Vancouver, B.C., I went straight to the source and asked them to clarify when someone would or wouldn’t need a license and this was their response to me:
“We require all companies/self-employed individuals (including professionals) to get a Business Licence. Anyone who does not get their payroll deducted by a company/organization, but where they generate revenue, is therefore considered an independent contractor. Contractors are self-employed and require a Business Licence. Note: An employee is a person who gets payroll deductions where the taxes are deducted out of the gross pay.”
If you are working out of locations in two different municipalities, you most likely are going to require a business licence in both. In some cases there are licences that will cover you in multiple municipalities for less than buying them individually. See what is available in your area.
Currently in Vancouver the following businesses require a licence:
• Commercial and industrial business: A business based within a building located in a commercial or industrial area of the City of Vancouver as defined in the Zoning and Development Bylaw • Home-based business: A business based in a dwelling located in a residential area in the City of Vancouver as defined in the Zoning and Development Bylaw • Out-of-town business: A business being carried on in the City of Vancouver, but with the business office located outside of Vancouver Only the business owner is required to get a business licence. Employees do not need to get individual business licences.
Another fun fact:
Whereas in one municipality you will require a business license to practice out of your own home, in another you won’t. This means even if you have a colleague (who swears they checked) that says you do – or don’t – need a business license because you are in similar circumstances, their information may be accurate for them and not for you if you live on different sides of certain city limits.
Take away message:
Call your local city hall and ask about your specific circumstances. It takes a few minutes and then you can rest easy knowing you’ve covered your bases. For more information about getting a business licence in Vancouver, follow this link HERE