Structuring & Registering Your Business in Prince Edward island

An important decision that needs to be made at the outset is the choice of legal structure for your business. There are numerous factors that will need to be considered to make the correct decision for your particular business. The most important consideration is that the corporate form will limit your liability for business debts and adverse judgments solely to the corporate assets as opposed to your own personal assets.

Choosing a business structure is one of the first and most important decisions you will make as a business owner. Your business structure can have a big impact on your success: it will affect your taxation and legal liability, as well as succession planning when it comes time to close or sell your business.

The three most popular forms for a business in Prince Edward island are sole proprietorship, partnership, corporation. The characteristics, advantages, and disadvantages of each are as follows.

Sole proprietorships

Characteristics.

A sole proprietorship is one person doing business in his or her own name or under a business name.

Advantages.

A sole proprietorship has simplicity. Plus, there is no organizational expense and no extra tax forms or reports.  

Setting up a business in the form of a proprietorship is relatively simple and the costs are low.

If the business loses money, the losses can be written off against other income of the proprietor.

Proprietorships are less regulated than corporations.  The administration of a proprietorship is less costly than that of a corporation. However, proprietorships are regulated by the provincial/territorial governments, and the proprietorship may have to be registered.

The proprietor is in control of all decision making, and receives all profits of the business.

Disadvantages.

A sole proprietorship in Prince Edward island is personally liable for all debts and obligations. Also, there is no continuation of the business after death. All profits are directly taxable, certainly a disadvantage for the proprietor, and business affairs are easily mixed with personal affairs.

The biggest disadvantage of a proprietorship is unlimited liability.  The proprietor is liable for all debts and other liabilities of the business.  If the business is sued, all the business and personal assets of the owner are at risk.

If the business is profitable, it will usually be paying higher taxes than if it was incorporated as a Canadian Controlled Private Corporation (CCPC).  The lowest personal income tax rate paid by a proprietorship would range from 19% to 26% (in 2015), depending on the province/territory. This rate increases with income.  Taxable income over $138,586 (federally, in 2015) is taxed at the highest marginal rates, which range from 39% to 54.8%, depending on the province/territory.

A proprietorship has a lack of permanence – if the owner dies, the net business assets pass to the heirs, but valuable leases and contracts may not.

Prince Edward island Sole proprietorship Registration Service for Only $39.99 plus government fees.

Fast and easy Prince Edward island Sole Proprietorship Online Registration. Company Formations Canada simplifies to the maximum the task of registering a new sole proprietorship business name in Prince Edward island, by offering an easy online sole proprietorship registration service.

Sole proprietorships are registered in Prince Edward island, according to the provisions of the Prince Edward island Partnership Act. Registration is completed by Filing a Statement of Registration Sole Proprietorship with the Prince Edward island Registries Office.

Register Now:

https://companyformations.ca/Prince Edward island-sole-proprietorship-registration-service/

Partnerships

Characteristics.

A general partnership involves two or more people carrying on a business together—normally pursuant to a partnership agreement—and sharing the profits and losses.

Advantages.

Partners can combine expertise and assets. A general partnership also allows liability to be spread among more people. The business can be continued after the death of a partner if bought out by the surviving partner.

The setup costs of a partnership are relatively low.

A partnership is less regulated than a corporation.  A partnership agreement should be drawn up to outline the terms of the partnership, what happens in the event of a dissolution, and what happens in the event of disagreements among partners.  In the absence of an agreement, or if certain provisions are not addressed in the agreement, provincial or territorial laws will determine some or all of the terms of the partnership.

Business losses can be written off against other income of the partners.

Broader base of experience, knowledge and skills to draw from.

Disadvantages.

Each partner is liable for acts of other partners within the scope of the business. This means that if your partner harms a customer or signs a million-dollar credit line in the partnership name, you can be held personally liable. Even if left in the business, all profits are taxable. Control is shared by all parties and the death of a partner may result in liquidation. In a general partnership, it is often difficult to get rid of a bad partner.

The biggest disadvantage of a partnership is unlimited liability.  The partners are jointly liable for all debts and other liabilities of the business.  If the business is sued, all the business and personal assets of the partners are at risk.  An exception to this is a Limited Partnership. Limited Partners, who contribute capital but do not participate in the management of the business, will have their liability limited to the amount of capital that they have contributed.  The partners who participate in the management of the business are called General Partners, and will still have unlimited liability.

Decisions must be made jointly.

If the business is profitable, it will usually be paying higher taxes than if it was incorporated as a Canadian controlled private corporation (CCPC).  See this same topic above under proprietorships.

The death or retirement of a partner will not end the partner’s liability for debts and obligations of the partnership that were incurred prior to the death or retirement.  Also, if a partner retires and does not make the retirement publicly known, he/she could still be held liable for obligations incurred by the partnership after the retirement.

Prince Edward island Online Partnership Registration

Fast and easy Prince Edward island Partnership Online Registration. Company Formations simplifies to the maximum the task of registering a new partnership business name in Prince Edward island, by offering an easy on-line partnership registration service.

Partnerships are registered in Prince Edward island, according to the provisions of the Prince Edward island Partnership Act. Registration is completed by Filing a Statement of Registration General Partnership with the Prince Edward island Registries Office.

Register Now your new Prince Edward island Partnerships:

https://companyformations.ca/Prince Edward island-partnership-registration-service/

Corporations

Characteristics:

A corporation is an artificial, legal person that carries on business through its officers for its shareholders. (In Prince Edward island one person may form a corporation and be the sole shareholder and officer.) Laws covering corporations are contained in the Prince Edward island Business Corporation Act.

Advantages:

If properly organized, a corporation has a number of advantages over other forms of business, including:

shareholders have no liability for corporate debts and lawsuits;

officers usually have no personal liability for their corporate acts;

the existence of a corporation may be perpetual;

there is prestige in owning a corporation; and,

capital may be raised by issuing stock. It is easy to transfer ownership upon death.

Disadvantages:

There are start-up costs for forming a corporation.

There are certain formalities such as annual meetings, separate bank accounts, and tax forms.

Corporation it must pay federal and provincial income tax separate from the tax paid by the owners

Prince Edward island Online Incorporation Service for Only $99 plus Government fees.

Prince Edward island Incorporation Service in 24 Hours. New low incorporation fee $99,99 plus Govt fees.  Business Corporations are incorporated in Prince Edward island, according to the provisions of the Prince Edward island Business Corporation Act with the Prince Edward island Corporations Division. Company Formations Canada provides fast and easy Prince Edward island Incorporation Service for only $99.99

, , , ,