Being "Legit"

Just curious how many of you out there are "legit" (as in you have a registered business and pay taxes and consider this job your "real job") and how you went about it. A friend and I were discussing the possibilities, and I am curious.

If you don't want to reply so publicly, please feel free to inbox me. I am hoping to learn!

I'm curious as to why you would want to register as a business? You have public healthcare, you pay no taxes, you can have a self-directed retirement plan that beats the hell out of CPP. To fly below the radar and keep 100 % of your income to yourself should be welcomed. I realize that you cannot get Worker's Comp and a disability plan could be tricky, but if you can set aside a portion of your income and get a private medical plan, the benefits of self-employment should be good. If you go "legit" (I don't like that term for this industry because we, your friends and clients, DO legitimize you) the tax burden will force you to incorporate, the book work will be onerous, HST -do you really want to tun over another 15% (in NS, at least) of your income to the tax man?-, and lawyers. I think you're better off as you are, but I may be missing something here. If I am, I apologize. Either way, I love the fact that you started this topic..food for thought.

Begin legit is the proper way of doing things. It is very easy. Just the same as any self employed person. Claim your money as an entertainer.

 

It is best to do it the proper way. In the future if you want to get a house, a new vehicle or open a business, then you can. As you can show where your money came from. There is nothing illegal about companionship.

LOL... thanks, Carley. I think you just pointed out exactly what I was missing. Also, if it was a lot of cash transactions, (which it is), only enough would have to be claimed to make it plausible. Thanks again.

I'm curious as to why you would want to register as a business? You have public healthcare, you pay no taxes, you can have a self-directed retirement plan that beats the hell out of CPP. To fly below the radar and keep 100 % of your income to yourself should be welcomed. I realize that you cannot get Worker's Comp and a disability plan could be tricky, but if you can set aside a portion of your income and get a private medical plan, the benefits of self-employment should be good. If you go "legit" (I don't like that term for this industry because we, your friends and clients, DO legitimize you) the tax burden will force you to incorporate, the book work will be onerous, HST -do you really want to tun over another 15% (in NS, at least) of your income to the tax man?-, and lawyers. I think you're better off as you are, but I may be missing something here. If I am, I apologize. Either way, I love the fact that you started this topic..food for thought.

I understand your sentiments, but the fact is legally the tax man is entitled to his cut, and not paying it is illegal. The consequences of getting caught not paying taxes can be severe.

Also how do you start this self directed retirement plan etc etc...any RRSP's, chequing/savings accounts etc etc etc require your SIN number and Revenue Canada will know. And with laws more directed against money laundering, banks are required to report deposits over, I believe $10,000/day, but I'm sure a bank would report any accounts that cause eyebrows to be raised. Only way to keep it completely under the table is bury the money in the back yard, and financially speaking, live off the grid

One final thing, sex for money is not illegal. Related acts are (bawdy house, living off avails etc). So why put oneself in legal predicament with the taxman for a few bucks

RG

Carley stole the words, right from my mouth. As a self employed entertainer you are able to build credit, to get loans for cars, mortgages etc. Additionally there are group insurance plans you can buy into just like a benefits package the a private sector employer would offer.

CRA, doesn't care how you earn your living so long as they get their cut ! This business is only shady if you treat it as such and thus the negative stigma and perception continue in an ongoing vicious cycle. If operated as a legit business then others will eventually and possibly treat it and perceive it as legit.

Thank you all for commenting!

I would also like to know how to go about registering a business, for those of you who are, if you could share some tips or maybe walk me through the process?

I feel overwhelmed at the prospect, and would love some input on that.

The only reason to create a business would be to have the business claim certain expenses such as advertising from its revenue. However your personal income (that which is used by banks to determine your personal income) would be lower and thus you would pay less taxes.

However there is overhead to running a business. Registration as a corporation costs a few hundred dollars and you would likely need the assistance of an accountant for filing yearly corporate tax returns.

As a cash business I would simply declare the level of income needed to balance your income needs for credit approvals vs. the taxes payable which increase as percentage of your income as you income level rises.

Okay, so I can claim it as self employed, which is fine... but how do you go about declaring and showing proof for an all-cash business? Obviously there aren't receipts or a pay-role for me to say "This is where my money is coming from, here's proof". I guess this is where "keeping books" comes into play? The money going into my bank account I guess would be proof enough?

There are a lot of cash businesses, and many are very legit. Cash is, after all, the legal way to pay, isn't it?

What CRA ask is that we declare our income and pay whatever taxes we owe them.

What is asked most of the time, for credit purposes, is your capacity to earn income, and the level of income you generate. Self employed entertainers or freelance professionals are common.

CRA doesn't require any proof of income. File your return and pay the taxes and they are happy. You don't need to run any of your income through a bank account.

Credit granting agencies will usually want their proof in the form of CRA notices of assessment (those documents showing their view of your tax return after you have filed) and a statement of account showing the declared and owing taxes have been paid. They figure if you've declared the income and paid taxes on then its real. However this will usually only occur for big loans, the key is to build a good credit rating over time.

Only in the case of a mortgage application have I seen any institutions interested in seeing a bank account and usually then its only to verify existence of the down payment.

CRA doesn't require any proof of income.

Essentially this is correct. We have a self-reporting tax system, and outside of getting tax slips CRA will accept what you report as self employed income. Now as someone on the previous page brought up it does need to be reasonable under the circumstances. If someone has been working as an SP for 20 years, they have a $400k home and are driving a new BMW it may make CRA ask where the money is coming from if you're only reporting $20k sales per year or not filing at all for that matter. How will they ever know what you drive or where you live? They likely never will unless someone tips them off (divorcing spouses and angry ex-business partners are notorious for dropping hints to CRA, but anyone with a chip on their shoulder would do).

Shy of an extreme example like the above, it would be very difficult for CRA to prove anything beyond what you are depositing to your bank account. That is solid proof of cashflow. What you don't deposit is going to be near impossible to measure. But it would be awfully difficult to ever buy a house or build that self-directed retirement plan without creating the audit trail with deposits.

And don't forget GST/HST either. Over $30k in sales and technically you need to register for GST and collect it from clients or it would come out of your pocket.

As for registering a business, a lot of jurisdictions legally require anyone operating a business to register the business name unless it is just your real name. So you're ok if your business is just 'Jane Smith' but 'Jane Smith, Service Provider' would require registration. Basically that's a compliance thing to get you started down the road of reporting income.

I can't say I've ever prepared a return for an SP. Neither have I heard of a CRA crackdown on this industry. As someone else mentioned it is largely 'off the grid' so to speak. And from CRA's perspective it would be exceedingly difficult and costly to find and audit because I suspect a lot of the cash won't ever see a bank statement. (They are considerably more interested in challenging claimed expenses on the returns people willingly file). In other words, I wouldn't lose much sleep over it.

Having run a few businesses and started 2 (currently operating very well)over a period of many years I can honestly say the best place to go and start a business is to talk to a Chatered Accountant (CA) or Certified Management Accountant (CMA) as a first step and not a book keeper.

The money spent (and its not a lot) up front is not only well worth it in terms of efficient advice (time and money saver) but also in terms of credibility when you file with CCRA (i.e. less likely to get audited or questions asked) and it has a professional stamp on it.

Not only that but when it comes time to seek credit as others have pointed out previously in this string, this will pay off huge when the CA puts a stamp on your "Normalized Income Statement" when you go to apply for credit at reputable financial institutions

Thank you all so much for discussing this! I am aiming to use this in order to build credit, maybe buy a home in the future, etc, so this is all very helpful information. I may just take the advice and speak with an accountant directly.

Thank you for all of the advice everyone!

As other people have stated, you should definately declare your income. It is illegal to not do so, Revenue Canada will likely catch you eventually, and you may be surprised how a conviction like that can limit your future.

Registering as a business makes certain things easier. If you plan on writing off expenses as business expenses, you should register as a business. Also, if you wanted to accept payments by cheque or credit card but protect your identity, registering as a business would help do that because any cheque or credit card payment a client made would show up as going to Eva Adore Inc (or whatever) and not your real name.

The other advantage to registering as a business is bankruptcy protection, but I don't think this really applies to the sex trade because sex trade workers do not really take big loans to invest huge amounts of money in new developing new products and services (or do they?)

So my advice, since you do not seem to have a lot of interest in the nitty gritty of business or tax laws, would be to simply declare your income straightup. But I think it would be a good idea to keep some form of books and set up a seperate account where you deposit your earnings from your sex trade work. There are a number of bookkeeping software applications out there, but honestly, you could probably make due with Microsoft Excel which is probably already on you computer.

I've been self-employed for most of my working life and have never registered my businesses. I was the only employee and have always worked from my home most of the time. The advice I received when I first started to work was that there was no need to register my business in most jurisdictions. You're eligible for all the same tax credits and whether the business is registered or not.

You can claim self-employment income on your tax return, make claims for legitimate business expenses, such as advertising, travel and materials directly related to your work. If you have a car, keep a log of your mileage when you go to meet a client. Keep a record of your auto lease payments, gasoline and repairs, too. You will be able to claim a portion of these costs as business expenses. If you tour, you can claim the cost of flights, accommodation and half of your meals. You can also claim a portion of your heat, electricity and home telephone expenses as well as the cost of your workspace.

Bank records are helpful, but the CRA won't ask for them. They do monitor bank accounts, however, so it would not be wise to deposit income and then not acknowledge receiving it when you file your income tax return. Undeclared cash income is still income, whether you put it in the bank or not. There are no laws requiring anyone to put money in the bank or to prevent us from spending cash.

I've been self-employed for most of my working life and have never registered my businesses. I was the only employee and have always worked from my home most of the time. The advice I received when I first started to work was that there was no need to register my business in most jurisdictions. You're eligible for all the same tax credits and whether the business is registered or not.

 

You can claim self-employment income on your tax return, make claims for legitimate business expenses, such as advertising, travel and materials directly related to your work. If you have a car, keep a log of your mileage when you go to meet a client. Keep a record of your auto lease payments, gasoline and repairs, too. You will be able to claim a portion of these costs as business expenses. If you tour, you can claim the cost of flights, accommodation and half of your meals. You can also claim a portion of your heat, electricity and home telephone expenses as well as the cost of your workspace.

 

Bank records are helpful, but the CRA won't ask for them. They do monitor bank accounts, however, so it would not be wise to deposit income and then not acknowledge receiving it when you file your income tax return. Undeclared cash income is still income, whether you put it in the bank or not. There are no laws requiring anyone to put money in the bank or to prevent us from spending cash.

I used to own a small business (a long time ago)- while I did not have an accountant at that time, the laws were less complicated. Since I moved in and out of country, I now rely on an accountant even for simpler tax questions as they can find many deductions many of us would not think is available today. And don't kid yourself, the tax man performs about 90% desk audits - anything suspicious is flagged up readily.

The bottom line, owning a small business increases the paperwork and you'll have to pay taxes, the flip side; many deductions are now available...

Okey, lets say I want to pay my taxes as an entertainer, How much would I have to pay? Would it be a percentage of my annual income, Or is it one set fee entertainers pay? I know you don't have to claim all of your income but what is a good amount to claim? Just having had my taxes done. I would like to prepare for next year. Is there a website with information on it? I'm super anal when it comes to bills ect, so the more prepared I am the more relaxed and happy I am.

I know when you make 12,000 a year you don't have to do your taxes.

I want to start a e-commerce business soon anyway. So should I just focus on that and forget about doing my taxes as an entertainer. Not knowing how busy my business will or will not be. I will have to register my business and it's name anyways. It seems easy if you go step by step. You can buy online programs that keep track of everything. With a business You could have a choice of paying your taxes monthly, every three or four months or every year. The thing is I don't know how long this process is going to take me. So knowing about paying taxes as an entertainer is always good.

Peachy,

Actually, you are suppose to claim all your income, it is just a matter of the challenge of a cash business of it being audited, and detected. I know that for certain vocations, such as waitressing, the tax man will look at what they think is reasonable for tips and can challenge if you claim something less. However, really not sure how far this has been taken in terms of through the courts.

The good thing, is that you can claim many things as a business operator, independent worker, that someone working for someone else can do.

I have no idea what the ladies do in terms of claiming their income from this business, but I doubt very many claim any or much. That said, each person makes this decision independently.

Also, it may be in your best interest to submit a tax return regardless of what you make, in some cases, certain credits that you can get, including things like the GST rebates, you will not get unless you file. Again, choices.

Peachy, never assume that if you only admit to making $12,000 or any other amount that you don't need to file a tax return. Even with minimal income, it's always better to file a return than not to file one. For example, you're only eligible for things like the GST/HST rebate if you've filed a tax return. Other benefits are also keyed to last year's taxable income. If you want to qualify for a loan or a lease, you may need to provide your Notices of Assessment for the last three years to demonstrate that you have adequate income. Not having those documents will limit your ability to get credit.

You need an accountant. Tell him or her the truth about what you do for a living and what your plans are for your business. Ask for advice and have them file your tax return for you.

All smart paid companions declare their income and pay taxes on it. The others risk problems with the CRA. Their penalties are harsh and inescapable.

This is something I have been thinking of and something I have been taking seriously. I have been talking to a bunch of people about doing your taxes as an escort. There are options you can do your taxes as an entertainer, as an adult entertainer or self employed.

The best piece of advice has been is to get a separate notebook and keep track of the money you bring in. You don't need to put your clients name or number you just simply have to do this: Write the date, write how long you saw the client and write how much you made. Start this a.s.a.p.

If you want to write off expenses keep your receipts girls. You can get receipts from taxis. If you have a driver you can keep track of your dives and how much you paid. Get your driver to write a letter to say that what you are saying is true, if he or she doesn't mind. If you want you can write off expenses of lingerie although I wouldn't want to. If you do, keep the receipts.

We are young now but time catches up with us fast so it is never to early to start you R.R.S.P's So this is another thing to start thinking about.

I hope this is helpful is there anything that I'm missing. I found this really confusing so I wanted to know what my options were before going to see an accountant. I think I'm ready to get started on my 2012 taxes. I like being prepared.

XoXo