# Keep my hobby a hobby or create a business?



## emperor (Jul 24, 2011)

I've been thinking about creating a small business but I don't know if it will work in my situation.

Right now I'm a union worker I have a working season and an off season. I usually make around 80K a year and in my off season collect some EI. I'm really into collectibles, things like coins, comics, cards etc. I usually spend 4,000 a year on such things and have a decent dollar amount of them saved up.

One day my friend came over and said I should start my own business and sell things online. I never really thought about it, I usually just purchased stuff and sold it to local shops. He mentioned I could get tax write offs and that got me thinking. Almost every expense I have could be used against the business. I have a condo and my den is full of these collectibles. I use my vehicle to drive to conventions and shops all the time, even when I travel I'm always shopping for collectibles. I use my computer, cell phone, printer etc all the time for this.
I'm not sure if this is possible though, can you work one job and still be self employed? Will it mess up my EI in the off season? I know if I make a certain amount it will, which is fine, but I don't want to lose my claim altogether encase it doesn't work. 

I guess my question is are the tax write offs worth creating a business? Or is it better to just keep it a hobby.


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## Guban (Jul 5, 2011)

Not sure about the EI question, but I'll weigh in on the taxes.

Yes, you can be employed and self employed at the same time while enjoying some tax write offs. Note, though you'll likely have to show profits eventually and get taxed on these profits at some point in time, or you will face having your business losses denied. Because it is a hobby too, there is a bit of self interest in there, and the CRA can go after you if you don't have a "reasonable expectation of profit". You can't run it year after year at a loss. How long can you have losses? CRA doesn't say.

All that being said, if you think you can make a small (or large) profit, a business may be good for you. It sounds like you would have many write offs on things you would spend your money on anyways. Be prepared to keep good records to justify your business deductions.


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## nobleea (Oct 11, 2013)

Guban said:


> Not sure about the EI question, but I'll weigh in on the taxes.


EI is calculated on a week by week basis. If you earn income (even self employed) in a given week, you're supposed to let EI know and they will adjust your weekly pay accordingly. Past a certain amount, it's a pretty aggressive clawback (as it should be).

Spending 4K a year on these things is a good start, but you'd have to break that down by cost of goods (for example buying stamps, coins) and overhead (computer, phone, etc). Cost of goods can only be deducted against sales, while overhead is a general deduction.


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## peterk (May 16, 2010)

I thought they reformed EI to eliminate such things? but I guess not.

Someone making 80k/year, who "gets" several months of vacation per year (regular seasonal layoff), and has 4k to blow on coins and comic books every year should not be collecting EI.

I work in the oil sands and all the shift workers up here that work for 2 weeks on and 2 weeks off don't collect EI for their 2 weeks off. Why should it be any different if you work 8 months on and 4 months off?

Not trying to dis you emperor, it ain't your fault. I would be doing the same in your situation. It's the system that is ridiculous and I'm speaking against, not you.

Good luck with the buy'n'sell business!


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## amack081 (Jun 23, 2015)

emperor said:


> I've been thinking about creating a small business but I don't know if it will work in my situation.
> 
> Right now I'm a union worker I have a working season and an off season. I usually make around 80K a year and in my off season collect some EI. I'm really into collectibles, things like coins, comics, cards etc. I usually spend 4,000 a year on such things and have a decent dollar amount of them saved up.
> 
> ...


Just a quick FYI:

As an individual buying/selling items would be deemed to be Personal Use Property (i.e property owned by a tax payer for his/her enjoyment---such as a hobby), when you sell personal use property, there can be capital gains; however no capital losses can be claimed (i.e capital losses is deemed to be $nil). 

Your coins may however be considered Listed Personal Use Properties (LPP)- which is same as above except that capital loses can occur and can be deducted against capital gains from other LPP only.

With this in mind, everything you sell and make a profit on is capital gains and should be reported as income.


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## emperor (Jul 24, 2011)

@Guban I should be able to turn a profit I just don't know how large, what I'd like to do is keep increasing my collectible inventory. So for example I normally buy 4K worth. If I got tax write offs I'd use that savings to get even more inventory. Then once I sell those collectibles and make cash I would use that cash to buy even more. The eventual goal to have high end merchandise. Collectibles worth 50 - 100 K instead of 1 - 10K. 

@nobleea Sounds good, so I should be okay because I won't be giving myself much of a salary if any. My goal will be increasing my inventory of collectables.

@peterk They did close lots of abuse of EI. My job isn't really seasonal. You get a job and work until you get laid off then you go to the bottom of the list and work your way back up until you get another job. It's kind of like working for a temp agency but during some times of the year it slows down so you don't go up the list very fast. Kicker is if you get a job outside the hall you need to take your name off the list so you can't get a job with them until you wait your turn. This business might even interfere with that, I'd have to ask. As for people that make a certain amount not qualifying for certain government programs that's a whole different topic that would need its own thread.

@amack081 Thanks for the info, I haven't done much selling mostly just collecting but it's good to know for the future.


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## indexxx (Oct 31, 2011)

As far as write offs go, and someone will correct me if I'm mistaken, it's not as easy as all that. Yes, you can claim things against your business- but only to a point. You have to prove what percentage you are using you car for, or your phone, etc. If it's also for our personal use, claiming it as a deduction is sticky- CRA suggests that you have a separate phone, computer, business vehicle, bank accounts etc strictly for business use just for that reason- everyone would try to avoid taxes by starting a small home business and writing everything off.

Not to discourage you at all- far from it! But just so you don't do it thinking it's an easy way to free vacations etc.


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## emperor (Jul 24, 2011)

If I end up spending more money for the same thing there is no point of doing it. I'll just keep spending my 4K and have it as a hobby. The idea behind the business is I could write off the expenses I incur and use that cash to buy more collectibles. At the end of the day if I have to buy new phones, computers, vehicles etc it would not give me any new capital and just hurt my collection.

You're right though if anyone can just write that stuff off everyone would do it so I guess I'll need to call CRA or an account and see what they say.


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## amack081 (Jun 23, 2015)

indexxx said:


> As far as write offs go, and someone will correct me if I'm mistaken, it's not as easy as all that. Yes, you can claim things against your business- but only to a point. You have to prove what percentage you are using you car for, or your phone, etc. If it's also for our personal use, claiming it as a deduction is sticky- CRA suggests that you have a separate phone, computer, business vehicle, bank accounts etc strictly for business use just for that reason- everyone would try to avoid taxes by starting a small home business and writing everything off.
> 
> Not to discourage you at all- far from it! But just so you don't do it thinking it's an easy way to free vacations etc.


Well he could attend a comic, coins and card conference in Hawaii... 

Typically an incorporated business will have its own accounts as you mentioned. 

If he is earning the income as an individual, he could deduct certain expenses (T2125) but the burden of proof is on him should CRA audit.


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## Guban (Jul 5, 2011)

indexxx said:


> As far as write offs go, and someone will correct me if I'm mistaken, it's not as easy as all that. Yes, you can claim things against your business- but only to a point. You have to prove what percentage you are using you car for, or your phone, etc. If it's also for our personal use, claiming it as a deduction is sticky- CRA suggests that you have a separate phone, computer, business vehicle, bank accounts etc strictly for business use just for that reason- everyone would try to avoid taxes by starting a small home business and writing everything off.


This is not true. You don't need to have a separate phone, computer, car, ...

As I said, just keep good records of your vehicle use and in any other areas that you are claiming deductions.


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## nobleea (Oct 11, 2013)

emperor said:


> @Guban I should be able to turn a profit I just don't know how large, what I'd like to do is keep increasing my collectible inventory. So for example I normally buy 4K worth. If I got tax write offs I'd use that savings to get even more inventory. Then once I sell those collectibles and make cash I would use that cash to buy even more. The eventual goal to have high end merchandise. Collectibles worth 50 - 100 K instead of 1 - 10K.
> 
> @nobleea Sounds good, so I should be okay because I won't be giving myself much of a salary if any. My goal will be increasing my inventory of collectables.


Just buying and building inventory will not count as a write off. You have to sell it. If you normally buy 4K worth, you would only be able to deduct that when you sell those 4K worth of items (presumably for more than you paid). You can't just buy inventory and keep deducting the cost against your regular income. The 'tax write offs' you are referring to are generally for your overhead, like your phone, internet, website, and a portion of your housing costs (reasonable) if you are using one room EXCLUSIVELY for this business. That's generally not a huge benefit if it's just a one person operation, maybe a hundred or two back a year.


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