Running a business from a rented apartment

I have run a freelance business out of four different rented apartments. In the first one I didn’t think about it at all: I had a laptop, some clients and a desk wedged between the bed and the radiator. It was only when a friend who rents in the same building asked whether I had told my landlord, my insurer or the tax office that I realised I had been running a business in a home I didn’t own without checking whether anyone minded.

Mostly, nobody does. Plenty of renters across Canada freelance, consult, sell online or run a one-person studio from home. But there are four parties with a stake in your setup, and each one is worth a quick check before something goes wrong rather than after.

Start with your lease

Pull out your lease and look for a clause about use of the premises. Many residential leases say the unit is to be used as a private residence only, or prohibit commercial use. What that means in practice depends on the wording and on your province’s tenancy law.

Quiet desk work, the kind where nobody can tell from the hallway that a business exists, is very different from running a hair studio, a daycare or a shipping operation out of the unit. Landlords generally care about things that affect the building: extra foot traffic, noise, deliveries piling up in the lobby, signage, increased wear, or something that might affect the building’s own insurance.

If your work involves clients coming to the door, inventory, equipment or anything louder than typing, it is worth raising it with the landlord and getting their agreement in writing. If you rent a condo unit, the condominium corporation’s declaration and rules may also restrict business use, separately from your lease.

“

Nobody minds the laptop. People start minding when the lobby fills with boxes that have your name on them.

Your city may have rules too

Municipal zoning bylaws decide what kinds of activity are allowed in residential areas. Most Canadian cities have some form of home occupation or home-based business rule, and many allow low-impact office work without any permit. Others require a licence for certain kinds of business, limit the number of employees or client visits, or prohibit some activities entirely.

Because this is set city by city, there is no national answer. Search your municipality’s website for its home-based business rules, or call the city’s business licensing office. It is usually a five-minute check, and it is much easier to do before you put a sign in the window.

Your tenant insurance probably isn’t enough

This is the one that catches the most people. A standard tenant insurance policy is designed for personal belongings and personal liability. Many policies limit or exclude business property and business activity, which can mean your work laptop, camera or inventory isn’t fully covered, and a client who trips in your hallway might not be either.

Insurers handle this in different ways. Some offer a home-business endorsement that adds coverage to your existing policy; others will suggest a separate small business policy. The only way to know what you have is to read your policy wording or call your insurer, tell them plainly what you do from home, and ask what is and isn’t covered. Not mentioning it is the riskier choice, because an undisclosed business can complicate a claim.

The tax side: what renting changes

If you are self-employed and your home is your principal place of business, or you use a dedicated space there regularly to meet clients, you may be able to claim business-use-of-home expenses. For renters, that can include a portion of your rent, along with a share of utilities and tenant insurance, based on how much of the home you use for work. The CRA sets the conditions and the method, and the claim generally can’t be used to create or increase a business loss.

Here is an illustrative example. If your apartment is 800 square feet and your dedicated office is 80 square feet, that is 10 per cent of the space. At $1,900 a month in rent, 10 per cent of a year’s rent would be $2,280, before adding the business share of other eligible costs. Your actual numbers, and whether you qualify, depend on your situation.

A few other tax basics apply whether you rent or own. Self-employment income is reported on your personal return, along with your business expenses. Once your taxable sales pass $30,000 over four consecutive calendar quarters, you generally have to register for GST/HST. And because no employer is withholding tax for you, setting aside a share of every payment for tax is one of the most useful habits you can build.

Small things that make it easier

A few practical choices have made my own setup calmer over the years.

None of this needs to be a big project. For most renters running quiet, desk-based work, the whole check takes an afternoon: read the lease, look up the city rules, call the insurer and set up your records. After that, the business on the kitchen table is just a business, and the apartment is still home.