Choosing the right legal structure for your business can impact on its future. Consulting a professional will help you evaluate your individual situation and advise you on which structure best matches your circumstances.
Sole Proprietorship is the simplest, and is relatively easy, fast, and inexpensive to set up. The law requires a business to be registered in the province where it is located. Proprietorships allow you to write off business losses against your personal income, which may be attractive in the early years of a company when losses are not uncommon. However, you can be held personally liable for your business debts and expenses. In some cases, this has meant the loss of owners’ savings and home.
Partnerships are very similar to sole proprietorships, but are complicated by the existence of multiple owners. Working together, members of a group can pool their knowledge, finances and resources. Sometimes this works well and strengthens the venture. However, when partners disagree, the results can be disastrous.
Incorporated businesses can often benefit from a number of legal and tax advantages not available to proprietorships or partnerships. Incorporation can provide some protection against personal liability for the corporation’s debts. But there are disadvantages, especially for small businesses, the process of incorporation can be expensive to set up and involve complexities which often require the services of a professional.