Deciding on a Business Structure

There are three main types of business structures recognized in Canadian law: sole proprietorship, partnership, and limited company (corporation). There are advantages and disadvantages to each type of business structure. The type of structure you choose will depend on the needs of your particular business and will have a fundamental effect on how you do business.

Sole Proprietorship

A sole proprietorship is a business that is owned and operated by one person. It is the simplest form of business organization.

Individuals who operate a business under a name other than their own are required to register with Corporate Registry by completing the form "Declaration of Trade Name". It should be noted that registering a trade name does not give you any right of ownership of the name.

(The address and phone number of Corporate Registry, along with other important contacts, are listed in Appendix A of this guide.)

Advantages and Disadvantages of a Sole Proprietorship:

Advantages:		Disadvantages:
Easy and inexpensive to set up		Owner liable for all business debts and obligations, including any acts commited by employees
Directly controlled by the owner/operator		Management base narrow (success dependent on expertise of proprietor); the business dies when the sole proprietor goes out of business
Flexible and adaptable		Can be limited to ideas and creativity of one person
Some business losses may be deducted from other income		All business income is taxed as personal income (can be advantage or disadvantage)
Wages paid to a spouse are deductible from business income