There are four types of business ownership possible in Canada: as an entrepreneur or small business owner, you can choose to set up a sole proprietorship, a partnership, a corporation or a cooperative. Choosing the ownership type most appropriate for your business will determine how it is organized, how revenue and expenses are handled, and how you file your corporate income tax. At Lift Legal, we recommend weighing the pros and cons of each model before deciding on the legal structure of your new business venture.
An unincorporated business owned and operated by a single individual is a sole proprietorship.
You may operate a sole proprietorship under your own name or under another name of your choice—provided that you do not add any of the legal designations of other forms of businesses (e.g., Ltd. for a limited company or Inc. for an incorporated company).
In a sole proprietorship, there is no legal separation between the business and its owner: the business is deemed an extension of the owner. The owner is therefore personally responsible for any debts or liabilities the business incurs. If a sole proprietorship fails or is sued for damages caused by accident or negligence over the course of business operations, the proprietor’s personal assets could be seized to discharge the liability. It’s therefore imperative to have sufficient business insurance coverage.
Other disadvantages of sole proprietorship include:
Whether you choose to set up a sole proprietorship, a partnership, a corporation or a cooperative, the legal form of business ownership you choose is an important decision. Your business’s legal structure will affect not only your setup, administrative and operational costs, but also your tax planning and possibly also your succession planning. It is something to decide even before deciding on a business name.
This is not to say that your business’s legal structure can’t change as your circumstances change. Choose the form of ownership appropriate to your present situation, and review it as your business grows. Trust the Lift Legal team to meet with you to provide the guidance and answers you need.
Contact us today to arrange your consultation.
Disclaimer:
The information on this blog and website is provided by Lift Legal for educational purposes only. It is intended to give readers a general understanding of the law, not to provide specific legal advice. Information contained in these pages should not be used in place of competent legal advice from a licensed, practising lawyer in Alberta. Furthermore, by using this blog and website, you understand that no lawyer-client relationship exists between you and Lift Legal.
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