You can be self-employed without creating the business yourself. But, what happens when you buy an existing business? Let's go over the tax checklist for when you purchase an existing business.
Yes. The CRA wants you to tell them when you start your own business or when you buy an existing one.
You'll need to determine the fair market value of the business you're buying in order to claim Capital Cost Allowance (CCA). These may already be set out in the contract but if not, you can do it yourself. Tally the fair market value by:
For example, if you buy a business for $200,000, divvy up the price accordingly. You could attribute $20,000 to accounts receivable, $40,000 for inventory, $40,000 for land and $40,000 for the building itself. You then subtract the purchase price ($200,000) from the net identifiable assets ($140,000) to come up with the goodwill amount ($60,000) The goodwill is considered an eligible capital expenditure. The CRA treats this in a similar way as assets that fall under the Capital Cost Allowance.
If you buy a business, you may not have to pay GST/HST taxes. This also applies if you purchase at least 90 percent of a business. Use Form GST44-19E to perform this election. If the seller is a registrant and you're not, you cannot use this election. Even with this, the GST/HST will still apply to the taxable supply of a service made by the seller.
