Disclaimer: While I am a designated accountant, I am not your accountant. If you have any specific questions, I recommend you discuss those with a designated accountant. Don’t know one? I recommend me!
This started out as one post and then kept getting longer and longer, so I decided to make a series on accounting for bloggers; specifically Canadian bloggers. Much of this information will be helpful for my American friends, but there are numerous differences between the corporate and tax structures of Canadian and American businesses.
If you haven’t legally set up your blog as a business (and this is totally okay – I haven’t!) then your blog is a sole proprietorship. What this means is that you operate the business and you’re responsible for any income, expense, returns, and debt of the business. Any income and expenses would be included on your personal tax return. This is going to be the most straightforward way to set up your blog as a business.
It’s unlikely, although possible, to have your blog set up as a partnership. This would mean there are two people operating the site as a company. First you will prepare a partnership return which would detail the income and expenses of the partnership, and then the net income/loss of the partnership would be divided per the partnership agreement and included on each person’s individual return.
If you are a corporation, you are likely a Ltd, Corp, or Inc (Canada does not have a LLC structure). You will be required to file a tax return on behalf of the business, and your business would be responsible for any income, expenses, or debt related to the venture. If you take an income from the business, this would be an expense of the business and income for you as an individual.
Picking the Best Structure
There are a zillion different things you can consider when determining the appropriate business structure for your blog. The most important consideration is going to be what will work best for you.
Not what your competitor is doing, not what your cousin’s boyfriend who took a business class recommends, but what is going to work best for you in the long run.
You can refer to the Canadian Business Network page for additional information on the three structures.
- simple business structure
- no additional filings – information is filed with your personal tax return
- no need to charge/collect taxes (the exception being if you make more than $30,000 from your business in one year then you will need to register and collect GST)
- you are personally liable for any debts related to the business
- can be difficult to track income and expenses as they are likely mixed with personal expenses (stay tuned for next week – I’ll be sharing an income and expense tracking spreadsheet with you!)
- income/expense split will be separated between parties
- partnership is its own entity, so would track income and expenses separate from the owners
- need to file annual partnership returns
- business and legal expenses involved in the setup and dissolution of the partnership
- you (and your partners) are personally liable for any debts related to the business
- considered separate legal entity from yourself
- limited liability
- possible tax advantages
- need to pay incorporation costs
- need to file separate tax returns in addition to regulatory filings with the government
Assuming you are not generating more than $30,000 in income per year through your blog, and it’s unlikely you’ll face a lawsuit as a result of information you’re including on your blog, I would recommend setting up your business as a sole proprietorship.
Yes, you will need to have a good system in place for tracking income and expenses (come back next Wednesday for a tracking spreadsheet!), but beyond that, you’re ready to go!
If you plan on generating significant income from your site (and sometimes this can happen out of the blue!) then you might want to consider incorporating. You might be able to receive some advantageous tax treatment as a corporation (note that if you are taking a salary from the corporation, this has the potential to negate the preferential tax treatment). It’s also important to note that if you are sued as an individual, all of your personal assets are liable, whereas if you are sued as a business, only the assets which are owned by the business are liable. (This is a very simplified statement, because going into all the possible scenarios where one might be personally liable are vast and are often convoluted.)
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Have you considered the appropriate business structure for your blog? Do you have any questions for me?
Accounting for Bloggers: Tracking Income and Expenses
Accounting for Bloggers: Filing Your Taxes (sole proprietorship)
Accounting for Bloggers: Filing Your Taxes (corporation)
Accounting for Bloggers: Frequently Asked Questions
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