You’ve decided to take the “next step” in your career and start your own business. You likely have lots of ideas flowing, but before those ideas can become a reality you will first need to figure out how you’re going to structure your business “on paper”.
What does this mean, how are you going to do this, and where do you start?
With all the excitement of opening your own business, figuring out the structure of the business is an often overlooked and understated step of the process. Ensuring that you understand your options and the implications of each option is important because it may not only save you time and money down the road, but it will also ensure that your business starts off on the right foot.
This three-part series will explore the ways that you can structure your business, as well as provide some general information on each option.
The three ways you can structure your business are as follows:
- Sole proprietorship
Let’s take a closer look at the sole proprietorship.
A sole proprietorship is the most basic way that you can set up your business. A sole proprietorship is formed when an individual carries on business for their own account, and no other parties are involved. Essentially, a sole proprietor will own and control the business by themselves. This does not mean that a sole proprietor cannot hire employees, this just means that the sole proprietor is the only individual at the helm of the business.
What are the “pros” of a sole proprietorship?
- Initial start-up costs are low.
- Fairly simple way to set up your business with few legal formalities.
- Capital losses can be offset against capital gains for tax purposes (please contact your accountant for further information).
What are the “cons” of a sole proprietorship?
The main “con” of a sole proprietorship is that your business is not its own legal entity, thus, the sole proprietor does not have “limited liability”. What does this mean? If the sole proprietor has certain business liabilities, their business and personal assets can be seized to satisfy those liabilities.
Should you decide that a sole proprietorship is the right structure for your business, what are some other things you might want to consider?
- Does your sole proprietorship require a licence to carry on a specific activity?
- Is the name of your business compliant with the relevant legislation?
Stay tuned for part two of this three-part series where I will explore “the Partnership” in further detail.
Disclaimer: A solicitor-client relationship is not established by viewing this article and will not be established until confirmed by the solicitor and client in writing. This article is not legal advice but legal information only and cannot be relied upon for its completeness. If you have specific questions, please contact a lawyer in your jurisdiction.
Jennifer Wilowski is a lawyer licenced to practice law in the province of Ontario. She is a Partner and co-founder at Anton & Wilowski LLP, a general practice boutique law firm located in Mississauga, Ontario. Her main areas of practice include Corporate Law, Real Estate Law, Wills & Estates Law, Civil Litigation and Cannabis Law. Jennifer is not your traditional lawyer; she is committed to redefining the delivery of legal services and takes a modern, transparent and holistic approach to the practice of law.
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