If the business is a corporation, it is considered a separate legal entity, and is therefore not related to a person’s personal income. If an owner becomes an “employee” or a “contractee” of the corporation, then the money earned is declared in one’s personal income tax. Similarly, if any dividends, bonuses or stock options are issued to an “owner” from “their” corporation (shareholders are considered to be equity owners in the corporate context), then it considered part of one’s taxable personal income.
If the business is not a corporation, then the business income becomes the personal income of the owner, subject to one’s share of the ownership of the business, in the case of a partnership, or in its entirety, in the case of a sole proprietorship. There is a line/section on the personal income tax form designated for business income or independent contract income.
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