Before you open for business, you have to decide on a business structure. Consider these three choices and what you need to know about them, and consult with a professional tax or legal advisor who can help determine which one suits you best:
Sole proprietorship
This type of business can be up and running quickly — in fact if you’ve already started doing business, you likely already operate as a sole proprietorship by default. There’s no need to incorporate, and no legal distinction between yourself and your business. You’ll account for your business in your personal tax return.
Sole Proprietorship Advantages
Easy way to establish a business
Least amount of tax or legal paperwork required
There can be tax advantages
What else to know about Sole Proprietorships
You have personal liability for any business debts and obligations
You’re the sole decision maker
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Partnership
If you go into business with someone else, you can form a partnership without having to incorporate. You would combine your financial resources into the business and establish the terms of your arrangement through a partnership agreement. As partners, you share in the profits, or losses, exactly as stated in your partnership agreement.
Partnership Advantages
New business costs can be shared
Opportunity to partner with someone with complementary knowledge or
strengths for the business
What else to know about Partnerships
As with sole proprietorships, there is no legal difference between you and your business
You will still have personal liability over any business debts
Consider how compatible you are for a working relationship
You will be financially responsible for a partner’s actions
Worth seeking legal advice on issues like profit sharing, breaking up the partnership, and more
Company Formations Canada provides fast and easy Canada Online General Partnership Registration Service and provides all the documents your new partnership will need to stay up-to-date and in compliance with your province of registration business names and partnership act.
Please select your desired province of registration
Corporation
An incorporated business is a legal entity, separate from that of the owners or shareholders. You can form a corporation by yourself, as the sole shareholder, or you can form a multi-shareholder corporation, which would be governed by an agreement on mutual rights and obligations.
Corporation Advantages
Your personal financial liability is limited
Ownership is transferable if you want to sell later on
Separate legal entity
Tax rate could be lower for an incorporated business
What else to know about Corporations
Corporations are closely regulated
Extensive records have to be kept, with documentation filed regularly with the government
Required to hold regular director meetings and annual meetings
Required to document the identity of all directors and beneficial owners
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