Choose the Business Ownership Model that Works best for You

One of the decisions you will need to make is what type of ownership is suitable for your business venture. The form of ownership you select will depend on your future plans.  The majority of small businesses start out as sole proprietors, but this may not be suitable for you.  The structure you choose all depends on your future business plan and the vision you have for your business. In this series we’ll outline the basic advantage and disadvantages of each legal structure of business.

Part One: Sole Proprietorship

Advantages

  • It is simple to start-up
  • Profits earned through the business are for the sole proprietor.
  • The owner can operate the business as she/he sees fit.
  • Once you have registered your name and obtained a business license, you are a legal entity and able to operate your business.
  • The termination of the business is simple.
  • Bookkeeping for a sole proprietor is simple.
  • There is no limit to your liability.  You can be sued for the debts of the business.  All your personal assets can be sold off to repay your business debts.
  • Your name is not protected.
  • An employer/employee relationship does not exist between a sole proprietor and his/her business.  Therefore as a sole proprietor, the owner cannot contribute to the business pension funds, provident funds and fringe benefits which employees are entitled to.
  • The business terminates on the death of the owner.
  • Obtaining finance for the business will depend on the security you have to offer financial institutions.
  • You are taxed as an individual, so the more your business earns, the more tax you pay.
  • You have no partners to share ideas and goals with.

Disadvantages

  • There is no limit to your liability.  You can be sued for the debts of the business.  All your personal assets can be sold off to repay your business debts.
  • Your name is not protected.
  • An employer/employee relationship does not exist between a sole proprietor and his/her business.  Therefore as a sole proprietor, the owner cannot contribute to the business pension funds, provident funds and fringe benefits which employees are entitled to.
  • The business terminates on the death of the owner.
  • Obtaining finance for the business will depend on the security you have to offer financial institutions.
  • You are taxed as an individual, so the more your business earns, the more tax you pay.
  • You have no partners to share ideas and goals with.

Also for more information on business name registration and other details, be sure to check out http://www.canadabusiness.ca

Get advice from a good small business lawyer and accountant

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s