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What Are Business Activities?

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  • Written By: Alexis W.
  • Edited By: Heather Bailey
  • Last Modified Date: 08 September 2014
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Business activities refer to all actions done in the course of business. The distinction between business activities and non-business related activities is important for many reasons. It is important when determining responsibility for liability in certain circumstances and it is important in determining an individual's tax obligation.

Under the United States tax code put forth by the Internal Revenue Service, certain types of business expenses are tax deductible. For example, if a person owns a car and primarily uses it for business purposes, that car might be tax deductible. Any item — from a phone to a computer to a fax machine — that is primarily used for business activities can be taken as a business expense. An office in a home can also be considered a business expense, making a portion of the mortgage tax deductible. These deductions reduce a person's taxable income, thus resulting in potentially significant savings.

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For a deduction to be legal, however, the item must legitimately be used primarily for a business purpose. For example, if the home office doubles as a playroom, the deduction would not be proper. In order to determine whether a deduction was proper and whether an expense was truly a business expense, the Internal Revenue Service (IRS) will look at whether it is used for business activities, and if so, how often it is used for such activities. Tax codes in other countries allow similar deductions and also use a similar test to determine whether the deduction for the expense is proper.

In addition, the concept of business activities can also be important in determining employer/employee liability in several contexts. For example, under the worker's compensation system in the United States, employers are liable for injuries that a worker sustains when he is performing work duties, even if the worker isn't physically at work. Thus, whether an employer's worker's compensation insurance must pay for an injury or not will come down to whether the injured employee was engaged in an activity related to business.

Likewise, law dictates that an employer is liable for the torts an employee commits while the employee is engaged in the course of business. If the employee is found to have been engaging in business activities when he caused an injury, the injured victim can sue the employer. This can result in significant liability.

The definition of a business activity will depend hugely on the type of business being run. Writing may be a business activity for a lawyer, while constructing a house would be a business activity for a contractor and caring for a child would be a business activity for a nanny. Generally, if the activity is required for the functioning of a given business enterprise or company, it can be considered a business activity.

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Markerrag
Post 4

@Vincenzo -- the analysis is even more problematic when the employee is supposed to be doing something business related but is on personal business at the time of the incident. In your example, let's say Joe's employer thought he was delivering something when the car crash happened.

Joe was actually going to see his daughter's play without his company's knowledge. Joe was on personal business, so he is clearly at fault, right? That is true, but how likely is Joe to admit he was going to see his daughter's play? There's a good chance he will lie about what he is doing, and that illustrates the problem with giving employees too much access to company property.

Vincenzo
Post 3

It can be tough to determine what are business activities and which ones are not, particularly when it comes to tort cases. Let's say an employee, Joe, is driving a company truck during business hours when he rear ends a car and causes injuries to the family in he vehicle. Is Joe or his company liable for those injuries?

That seems to turn on what Joe was doing at the time. If he was, say, making a delivery for the company then he was clearly engaged in a business activity and the company will probably be liable. If Joe was, say, going to see his daughter's school play at the time, then it might be argued he is at fault.

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