Many Canadians who work from home will tell you that it’s a jungle out there. If you have a small budget, you may have a web site and be doing a little free advertising. But a good way to get yourself noticed in the freelancing world is to join a site that brings buyers and freelancers together.

These kinds of sites will allow buyers to post projects, and the freelancers to bid on them. But unfortunately, even this has no guarantees; a freelancer can go long stretches of time without winning any projects at all, which can make this species of career a precarious one.

So to a freelancer, getting hired by a company long-term is often seen as the ‘holy grail’ of this type of work, as the freelancer can still enjoy the independence of working for themselves while earning a steady income.

Many Ways for Effective Virtual Communication

Working online can mean that a Canadian freelancer does business with a company that could be on the other side of the world. This can present some challenges where communication is concerned. But most of these issues can be eliminated with a little effort on both sides.

Effective communication is key for any successful relationship, including business. If details about a project are vaguely communicated, the freelancer will not be able to produce the quality of work desired. And so being detailed as possible about all aspects of a project is crucial.

Electronic communication in the form of instant messaging programs, teleconferencing and other electronic methods is readily available these days. And this type of communication is usually best for those working in a cross-border situation, as they usually won’t incur long distance charges. Finding the one which will work best for both you and the company you’re working with is as easy as discussing it via email and deciding on a program.

How Tax Laws Apply To Canadians Working Virtually

One aspect of the virtual work situation that stumps many Canadians are tax issues. If you are a registered as a business with your province, the type of business designation you registered under will be important. Most businesses in Canada fall either under a sole proprietorship or a corporation. And there are advantages and disadvantages to each.

A sole proprietorship is definitely the easier and more affordable option, as you need only pay for your business license and renewals. Incorporating your business can cost you $1000 or more at the outset. However, as a sole proprietor, you will have to assume all liability for your company. This means that in the event that you run into some kind of financial trouble, your personal assets, such as a car or home, can be seized by the government.

A corporation has a much longer life than a sole proprietorship. For example, even if you leave your company, your corporation can continue its business. This is not the case with sole proprietorship, which dissolves whenever you decide to end your business. However, the latter does provide you with the benefits of far less paperwork and effort to close your business if things aren’t working out the way you had hoped.

Corporations pay lower tax rates than sole proprietors in Canada. As well, there is more freedom as to when you report your income, unlike sole proprietorship, which requires that you report at the calendar year’s end. A corporation also allows you to determine when you are paid, and make your family members shareholders. Doing this allows you to redistribute your income to lower income individuals and benefit from the lower tax rates.

But incorporation involves much more accounting and paperwork than sole proprietorship. In addition to this, your books must be up-to-the-second current and you will have to follow numerous corporate bylaws. This can add up to significant accounting costs, as well as the cost to pay those on your board of directors.

Deciding On the Best Tax Designation

The best way to determine the most beneficial classification for you is to research it online, and perhaps consult with a financial professional. Once you’ve chosen your direction, the next question may be to which country you should be paying taxes.

If you are living in Canada and working virtually for a U.S. company, you are only subject to Canadian tax law. But if you travel to the United States to attend meetings or discuss projects, you will then have to look into the payment of things like Medicare and U.S. federal taxes. These items will have to be reported on a U.S. tax return as well as on your Canadian return.

Another important designation is whether you are an employee or an independent contractor with the company you’re doing work for. The general rule is as follows: if the person who is paying you has the legal right to control or direct only the end result of your work and not what is done or how it will be done, then you are an independent contractor.

Although it may all seem overwhelming, the benefits of working for yourself often far outweigh the effort needed to identify which type of business you are and which tax laws you fall under. Home workers enjoy many freedoms, such as not having to adhere to dress codes and putting in as many or as few hours as they like. In addition, there is the pride that comes with knowing that only they own their business and are responsible for the successful company that it has become.

Article References:

Canadian Tax Law on BDO.ca

eHow.com Tax Issues

Article is by Elizabeth Brosuga is an independent contractor living in Canada, but working for a company in the United States.  She enjoys writing about technology, and specializes in low cost broadband reviews.