The preliminary stage of starting your own company can be a daunting task.
Many business owners may not be aware of the various business structures available to them.
It is very important to understand the difference between business structures and determine the benefits before choosing what works best for you, as your business structure is the basis of your company, and may determine how you own and operate your business in the future.
Sole Proprietorship: This is a simple business structure where a company is owned and operated by an individual.
As a Sole Proprietor you may be personally liable for your business and any debt that the business may incur.
Corporation: This is a business structure that allows a company to be recognized as a separate legal entity.
This company is registered with the Federal or Provincial government, and corporation owners must abide by the rules and regulations of the Business Corporations Act (Canada or Ontario).
Corporations are registered and identified by their own unique legal name, and can be owned by multiple shareholders. Incorporating usually provides individuals with liability protection against their personal assets.
Why Incorporate: Incorporating your company is a great way to protect yourself and your personal assets.
Not only do business owners benefit from liability protection, they may be eligible for tax incentives and exclusive financing programs that are not available to Sole Proprietors.
This organized business structure is regulated and all developments and modifications made to the business can be tracked. This increases your credibility as a company, which will be more enticing to possible shareholders and partners in the future.