What Is A Personal Service Business?
The Personal Service Business Industry in Canada
For many people, managing a household is not that easy. There are chores and other essential tasks that need to be done in order to keep the house together. A personal service business is one that accomplishes tasks for the benefit of its customers. Cleaning, traveling, hospitality, maintenance, and consultations are examples of such tasks. Since most homes nowadays have income generated from most adults in the household, personal services are being hired to ensure the home is appropriately managed.
Some examples of Personal Service Businesses:
Make-up Artists
Hairstylists
Events planners and coordinators
Doulas
Personal Shoppers
Housekeepers
Private car drivers
Other personal services include accounting, computer sciences, architecture, consultancy services, engineering, health services for humans and animals, law firms, and performers.
What is the Personal Service Business in Canada?
Personal service businesses are established by people who offer their skills and products to another company or individual that would normally be done by an employee. Instead of being a self-employed person or a contractor, the laborer is considered an incorporated worker. A personal service corporation is a corporation formed specifically by professionals to provide personal services while benefiting from a lower tax rate on profits. The services are provided by the corporation’s owners.
If you want to set up your own Personal Service Business, you need to put a lot of things into consideration. Things like how dedicated, knowledgeable, and passionate are you about this business venture? You need to have all the skills required and not just basic knowledge because it will be difficult for you to market your business if you’re not a professional. You can’t sell something you don’t have. You have to have extensive knowledge of this craft. You also need to set goals and have a timeline of your business growth at different points in the future. You can’t always just break even; you need to profit from this business too.
One of the most important aspects, of course, is your funds. You need to have the capital to start any business so you can buy the necessary materials and equipment you need to pursue this goal. You need to create a budget plan and carefully allocate where the money should be going. There should be a plan on how it will grow and prosper. You can’t just aimlessly spend money on things you want and consider it as a business expense. You need to learn to prioritize your finances.
And of course, know how to sell your business and your products. Knowing how to market your services is essential to business growth. It will help you on getting clients that will patronize your business. If no one knows you or the services you offer, chances are, it’s not going to go well. If you do an amazing job, your clients will continue to do the marketing for you and recommend you to other potential clients that would be interested in availing your services. Learning how to network with the correct people is crucial to your business’ growth.
How will this affect your taxes?
Suppose the client asks you precisely which tasks to be done, when to do it, and how it should be done. In that case, the Canada Revenue Agency (CRA) will count you as belonging the client’s control and classify you as a personal services business. From the government’s perspective, simply renaming an employee doesn’t mean they’re not an employee, specifically when they’re performing the same work a worker would do.
The CRA deliberates over several aspects to determine whether a person is an employee or an independent worker. To be considered self-employed, you must be the one in charge of your work hours. You’ll also need to invest in the tools you’ll need to do your job, such as the products you’ll use to fulfill your duties. Furthermore, having clearly defined contracts with multiple clients will demonstrate that you do not report to a single boss as you are your boss.
When the CRA had defined you as a personal services business, you lose the tax benefit of claiming business expenditures and the eligibility for Small Business Tax Deduction. This means on your first $500,000 of active pay, you lose the advantageous tax rate. You may also be inspected and reevaluated for earlier tax years, resulting in additional tax accountability.
The corporation will pay taxes under category C corporation. The proprietors must regard their generated income to a corporate system, which is usually given a lower tax rate than the rate of the individual service provider. As a result, the percentage of profit retained by the corporation avoids many of the taxes that the individual would have to pay if she received the income directly. A C corporation can only be categorized as a personal service business if its associates own more than 10% of the stock and provide at least 20% of the establishment’s personal services.
JTT Accounting Services Can Help You!
As a Personal Service Business owner, you value development, and so do we. We value your aspirations and hard work, and we believe that you deserve all the time to devote to your craft. We believe in your vision and this is why we will take the worries taxes bring to you and assist you through all the legalities you need to be aware of. We include every part of business finance at all levels and work throughout the country. JTT Accounting is your best option for accounting services in Canada.
Our inclusive range of services includes bookkeeping, accounting, tax, and advisory services to meet all of your needs. Our qualified accountants can assist you in establishing a business, maintaining compliance with CRA and provincial requirements for your company, and providing perpetual year-end review processes.
We work with businesses of all sizes, from start-ups to Fortune 500 corporations – large or small, we can provide accounting services that are tailored to your specific requirements. Look no further than our firm if you’re looking for an accounting firm with experience in providing the best possible service at competitive rates!
Quick Guide: Layman Terms, What is a Personal Services Business In Canada?
A personal services business is a business that provides personal services to individuals. The definition of a personal service includes activities such as hairdressing, beauty services, massage therapy, and fitness instruction.
In Canada, the Income Tax Act defines a personal service business as any business that provides services to individuals for a fee or other consideration and in the course of which the individual is required or expected to provide his or her own labour.
Moreover, a personal services business is a form of self-employed business in Canada. These businesses are typically temporary and provide services to clients in specific areas of expertise.
Plainly, a personal services business is an independent, self-employed enterprise that provides services to clients on a temporary basis in a particular area of expertise.
Personal service providers can offer their skills as freelancers or they can work for themselves as entrepreneurs.
The following are the types of personal service businesses:
– Personal care and beauty: such as hairstylists, massage therapists, fitness instructors, estheticians, etc.
– Personal shopping: such as shoe salespeople and fashion consultants
– Personal finance: such as financial planners and tax preparers
Intrinsically, a personal services business is any business that provides a service to a customer, such as:
– Hairdresser
– Massage Therapist
– Accountant
– Lawyer
etc.
The majority of these businesses are small and employ less than 5 people. They are often funded by the owner themselves, but they can also be funded by family or friends. The work is flexible and there is no need for large upfront investment.