Incorporation Lawyer & Business Startup in Toronto​

What is the Right Structure for my Business?​

Defining the structure of a new business is crucial at the start. Decisions made at the earlier stages of a new business might have significant importance and impact on the business in the future.

When starting a business, there are a few options to consider:

Sole Proprietorship

Operating as a sole proprietor is an option for those who wish to start by themselves. To operate under a sole proprietorship, you’ll need to register a business name and obtain a business number and an HST number if required. It is the most cost-effective and straightforward structure you might choose. On the other hand, as a sole proprietor, you should assume personal responsibility for business debts and liabilities. You will also be paying income tax on your earnings at your personal marginal, which can result in higher potential liability and tax burden.

General Partnership

You can opt for a general partnership when starting a business with others. As a partner, you’ll typically share personal responsibility for any debts and liabilities of the partnership, regardless of whether you incurred them. You will also be personally liable if your partner takes out a loan.

Incorporation

Incorporation is another option you might want to consider while starting a new business, regardless of whether you’re starting a business alone or with others. A corporation is a distinct legal entity (a legal person) that possesses all the rights and privileges of a natural person, such as owning property, borrowing money and entering into binding contracts. A corporation has directors and shareholders and legal responsibilities to maintain incorporation documents filed and up to date.

In addition, incorporating your business can have certain advantages, such as limited liability protection, tax benefits, and credibility. A corporation does not necessarily end with the death of its owner, as in a sole proprietorship. However, if you wish your business to exist, you might have to do some planning with your family or employees or even create a will. If there is more than one shareholder in your corporation, you might want to consider having a shareholder’s agreement to plan for the transition.