Self-employment
Self-employment is the act of generating one's income directly from customers, clients or other organizations as opposed to being an employee of a business .
Generally, tax authorities will view a person as self-employed if the person chooses to be recognized as such, or is generating income such that the person is required to file a tax return under legislation that subsists in the relevant jurisdiction. In the real world the critical issue for the taxing authorities is not that the person is trading but is whether the person is profitable and hence potentially taxable. In other words the activity of trading is likely to be ignored if no profit is present, so occasional and hobby- or enthusiast-based economic activity is generally ignored by authorities.
Self-employed people generally find their own work rather than being provided with work by an employer, earning income from a trade or business that they operate. In some countries governments (the United States and UK, for example) are placing more emphasis on clarifying whether an individual is self-employed or engaged in disguised employment, often described as the pretense of a contractual intra-business relationship to hide what is otherwise a simple employer-employee relationship . https://www.youtube.com/watch?v=Als7oyi5slg
Advantages of Self-Employment
- Independence, control and freedom from routine - Companies or individuals you work for are your clients, not your employers. As clients, they can state what results are expected from you, but they do not direct your work. Of course, you want to satisfy your clients if you want to receive more work, favourable referrals or better rates. But you are your own boss - you decide when, where and how to work to get the job done.
- Financial rewards - A business may become very profitable. Companies are willing to pay more to independent contractors because they don't have the expensive, long-term commitments that they do with permanent employees, such as benefits, unemployment compensation and pensions. Independent contractors may also deduct business expenses from their taxes, which may increase their net pay. Many successful business in Canada are run by newcomers or immigrants.
Disadvantages of Self-Employment
- Less security - It will be your responsibility to make sure you always have work to do. This means you may sometimes be without work and therefore without income.
- Fewer free benefits - You will have to pay for your own vacation time, fund your own retirement plans, and buy your own dental, disability and life insurance.
- Paying taxes - As a self-employed person, you are solely responsible for doing all the paperwork and paying your taxes on time. If you are an independent contractor, you will pay estimated taxes quarterly to pay your Canada Pension Plan contributions and income tax.
