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Ontario|Business LawOther Business Issues 235 Home businesses The term 'home business' generally refers to a business that is run by someone who is self-employed and who operates the business out of their home. Home businesses have become very popular recently. Technology such as fax machines, e-mail, and the Internet have made it easier for many people to run a business from home. There are several legal issues that you should consider if you want to start a home business. Many of these are general issues that are important for all businesses. For example, all businesses must decide what form of business to use, and all businesses must obey employment standards and deduction requirements. Home businesses must pay special attention to zoning restrictions, tax issues, and licensing requirements. The following information is a brief introduction to each of these issues. More information about each topic is available on Legal Line .
- Form of the business
First, you will have to decide what form of business to use. The three main forms of business are sole proprietorships, partnerships, and corporations. Each form has different legal requirements, and each has several advantages and disadvantages. More information about the three forms of business is available on Legal Line .
- Employment standards and deductions
Second, if your home business employs other people you will have to follow general employment standards. For example, you cannot pay your employees less than the legal minimum wage, you cannot fire an employee in a way that violates the laws concerning termination of employment, and you must obey occupational health and safety laws. You will also have to deduct employer deductions such as Canada Pension Plan contributions and employment insurance contributions from the employees' pay cheques. You can obtain more information about an employer's legal responsibilities from other sections of Legal Line , or from the Ministry of Labour.
- Zoning restrictions
Third, you should check your municipal zoning by-laws to make sure that the activity you propose is allowed in your area. Zoning restrictions are particularly important for home business owners because many activities are not allowed in residential areas.
- Tax issues
Fourth, there are several tax issues that home business owners must consider. For example, working at home means that you may be able to deduct some of your housing costs from your income, which will affect the amount of personal income tax you will have to pay. However, it also means that if you own your home, when you sell it, part of the value will not be considered your principal residence. This means that you may have to pay tax on capital gains allocated to the office portion of your home. One thing that you should do to minimize the negative tax implications of working at home is to get a letter of opinion about the value of your house from a realtor when you start the business.
Depending on the type of business you operate, you may also have a legal responsibility to collect various provincial and federal taxes.
- Licences
Fifth, depending on the type of business you operate, you may need a licence for the activity you propose. There are various municipal, provincial, and federal licences that you may need depending on the type of business you plan to operate. You can contact your local municipal authorities to determine if your business will be affected by local business regulations, municipal business taxes, or licensing requirements. The phone number is in the Blue pages of the phone book under Municipal Government. You can also contact the Ministry of Consumer & Business Services for more information about provincial licensing requirements.
- Public perception of home business
Another challenge for home businesses is the general perception of home business. Sometimes home businesses are not taken seriously or treated as favourably as other businesses. It can be more difficult for home businesses to secure a loan and to get sales. However, this perception is changing because the number of home businesses is increasing rapidly.
Starting a home business can be a risky and rewarding venture. Because the legal issues which arise with a home business can be very complicated, you should consult a lawyer for assistance and advice.
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