There is more to the CRA's methodology of what is considered passive. You need at least 8 employees for it to be considered an active business. None of those 8 employees can be family members. This was really hard because most of the people who worked at the business were family members. I guess in essence the CRA just makes it really hard on family businesses for some reason
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Perhaps they are worried about people abusing the system and so their remedy has ended up being overly harsh. It is not uncommon for that to happen when it comes to rules and regulations.
Pretty much, leave it up to a few bad apple to ruin in for the rest of us. I guess phantom employees in family businesses and corporations in general are a real problem in Canada, so I guess this is a great way to weed them out.