Launching a home-based craft business offers many advantages to Canadians who need a job that allows them to be creative and offers flexibility and convenience.
While you may plan to start small, it's important to position your home-based craft business for success and growth. Even if you consider your business strictly a hobby, the Canadian Revenue Agency (CRA) requires you to declare all your profits when you file your Canadian income tax.
You can write off business expenses against your income, of course. Because yours is a home-based business, your home office provides a valuable deduction. You can claim a percentage of your home's expenses, like property taxes, mortgage interest and home insurance. Getting special insurance for your home-based business offers another opportunity for a valuable tax deduction.
Insuring your home-based business may not be at the top of your to-do list, but it's crucial. Depending on the type of homeowners insurance you have, you could run into problems if you are conducting undisclosed activities on the premises. In some cases, running an uninsured home-based business could void your homeowner's insurance when it's time to make a claim.
Business property
Home-based business insurance packages can be tailored to meet the needs of your craft business. Start with a basic insurance policy that covers your inventory, supplies, and equipment. Make a list of your assets and calculate how much money it would cost to replace the things that make it possible for you to create and sell your products. Be sure to include your computer and cell phone.
General liability
If your clients visit your workspace, you must have general liability insurance to cover costs associated with injury-causing accidents. If a friend or relative is visiting your home and they fall, your homeowner's insurance will cover their medical costs. If your client visits your studio and they fall, your homeowner's insurance will not cover the costs of their injuries.
Your general liability policy can also cover injuries to customers at your booth. If a shelf falls and hurts someone or if a windstorm blows through and destroys your work, this type of insurance is essential to cover damages.
Business vehicle
If you use a vehicle to transport your goods to craft fairs or farmers' markets, it's smart to get a separate insurance policy. Your car insurance policy covers personal use of your vehicles, but it may not cover expenses and liability if you are involved in an accident while conducting business.
Business interruption
Even if you only work part-time, consider the impact your income has on your family's finances. What if you could not work because of a natural disaster like an earthquake or fire? Business interruption insurance covers lost revenue in case disaster strikes.
You can get help understanding what types of insurance best suit your home-based business by contacting the Insurance Bureau of Canada. After deciding what kind of insurance policies you need to cover your business activities, be sure to shop around for the best rates.
