Business start rules you should know

The most common questions posed by new entrepreneurs revolve around the starting activities of a business. Here’s what you need to know if you are in the process of starting up.

1. Open a separate business bank account. Never co-mingle personal and business moneys. Never give the tax department a reason to scrutinize your business and your personal accounts. Also, obtain a separate charge card for the business. Never put business charges on your personal charge cards.

2. Business Start Criteria. In order for any amount to be deductible on the tax return, the taxpayer must be found to be “carrying on business” in the fiscal period in which the expense was incurred.

So when are you considered to be in business? Did the expenses you incurred precede the start of the business, or did they take place after the business had commenced? When did the business actually start? Here are some guidelines, based on Interpretation Bulletin 364:

  • A business starts whenever some significant activity that forms a regular part of the income-earning process takes place.

  • There must be a specificoncept of the type of business activity that will be carried on. 

  • An organizational structure must be in place to undertake the essential preliminaries, to show whether this is a one time transaction, or an on-going enterprise.