TYPES OF BUSINESS
When you decide to operate a business, the first question you need to address is what legal form the business will take. The structure of your business will depend on whether you want to run the business by yourself, with a partner, or with associates. There are four types of business structure:
- Sole proprietorships
- Partnerships
- Corporations
- Co-operatives
Sole Proprietorships (Self-Employed)
In this type of business organization, you are fully responsible for all debts and obligations related to the business, and all profits are yours alone. Because you are sole owner of the business, a creditor can make a claim against your personal or business assets.Advantages:
- A sole proprietorship is eEasy and inexpensive to form
- It has the lowest amount of regulatory burden
- It gives you direct control over decision making
- It allows you to deduct business losses from your personal income
- All profits will go to you directly
Disadvantages:
- You have unlimited liability (if you have business debts, personal assets can be taken to pay them off)
- Income is taxable at your personal rate, and if your business is profitable, this may put you into a higher tax bracket
- There will be a lack of continuity in your business if you need to be absent
Partnerships
A partnership is a good business structure choice if you want to operate a business with a partner and do not wish to incorporate. In a partnership, financial resources are combined and channelled into the business. You can establish the terms of your business with your partner and protect yourself in case of a disagreement or dissolution by drawing up a partnership agreement. As partners, you will share the profits of your business according to the terms of that agreement.
Advantages:
- The partnership’s start-up costs are shared equally between you and your partner
- You each have an equal share in management, profits, and assets
- You and your partner can deduct business losses equally from your personal incomes
Disadvantages:
- A partnership is similar to a sole proprietorship in that there is no legal difference between you and your business
- You have unlimited liability (if you have business debts, personal assets can be taken to pay them off)
- There is the possibility of a conflict developing between you and your partner
- You will be held financially responsible for business decisions made by your partner (for example, a broken contract)
Corporations
A corporation (also called a "company") is a legal entity with its own legal personality that is distinct from its owners (called “shareholders”) and the individuals who manage and run its affairs (called “directors” and “officers”). As a shareholder of a corporation, you are not personally liable for the debts, obligations, or acts of the corporation.
Advantages:
- With a corporation, you have limited liability
- Ownership is transferrable
- The company has continuous existence
- There are possible tax advantages, as taxes may be lower for an incorporated business
Disadvantages:
- It is more expensive to incorporate than it is to create a partnership or sole proprietorship
- Extensive corporate records are required, including records of shareholder and director meetings, and documentation must be filed annually with the government
- There is the possibility of a conflict developing between shareholders and directors
- There can be problems with the residency of directors
Co-operatives
In a cooperative business structure, the business is owned by an association of members. It is the least common form of business structure, but it can be appropriate in situations where a number of persons or businesses decide to pool their resources in order to fulfill their common needs, such as product or service delivery, product or service sales.
Advantages:
- A cooperative is owned and controlled by its members
- It is run democratically (one member, one vote)
- Its members have limited liability
- It has profit distribution
Disadvantages:
- There is the possibility of a conflict developing between members
- The structure necessitates a longer decision-making process
- Members must cooperate in order to achieve success
- Extensive record keeping is required
- There is less incentive to invest additional capital
OUR SERVICES
If you plan to register a business with a complex ownership structure and different share classes, it is wise to seek legal advice. However, if you are planning to register a business that does not have a complex structure, we can assist you. We could, for example, help you to incorporate if you are the company’s only shareholder, if you have just a few partners, or if there are no restrictions on the share transfers, quantity of shares, and the maximum number of shareholders.We can register your company with the minimum requirements permitted by law. However, should you later decide to restructure your company, you can always seek legal advice on how to proceed.
Pricing
- Sole proprietorships: $150
- Partnerships: $225
- Corporations: $1,000+
INCLUDED IN OUR PRICES:
- Company minutes book
- Shareholder agreements
- Registration of your GST/HST account
- Registration of your payroll deduction account
- Registration of your import-export account
NOT INCLUDED IN OUR PRICES:
- GST/HST
Check our availability.
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