If you’re thinking about registering your sole proprietorship or incorporating a business, you’ve come to the right place. Ownr is here to help make the process easy.
Ownr is a platform designed for entrepreneurs looking for a reliable and affordable way to get the legal protections offered when you incorporate your business.
Here’s a guide for some of the most common considerations entrepreneurs think about when taking next steps to incorporate a business.When you’re done incorporating your business, Ownr can help you design and create a sweet logo to bring your business brand to life.
What does it mean to incorporate a business
It sounds like a simple question, but it’s one the Ownr team gets asked often.
“The act of incorporating creates a new legal entity called a corporation, commonly referred to as a company. Your corporation will have the same rights and obligations under Canadian law as a natural person. Among other things, this means that it can acquire assets, obtain a loan, enter into contracts, sue or be sued, and even be found guilty of committing a crime.”
If you’re still undecided about whether you should become a sole proprietor or incorporate your business here’s a review of both of these options. You can decide what’s best for you, and your business.
What is sole proprietorship?
As the title suggests, you are the sole owner of your business. This means you take on all responsibilities, profits and debts of your company.
Benefits of a sole proprietorship
It’s simple and quick to register, especially with Ownr
You enjoy full control over decision making, no need for board or shareholder approvals
Deduct business losses from personal income, helping you remain in a lower personal income tax bracket
Low startup costs
Considerations and risks of a sole proprietorship
You’re fully liable. If your business incurs debt, you are personally responsible. It’s that simple
If your business becomes super profitable, it means you’ll personally pay more taxes. We could’ve put this on the list of benefits, but it’s important to know you’ll likely jump tax brackets if your business starts making more money
Raising money is more difficult if you’re a sole proprietorship. Financial institutions and investors may require your business to be incorporated before they give you a loan or make an investment
You have the option to incorporate under provincial law or federal law. Companies incorporated under provincial law can operate in any province or territory provided they register as extra-provincial incorporations. Companies must also register extra-provincially in each province or territory where they operate.
Regardless of whether you incorporate under provincial law or federal law, incorporating means that your business operates as its own legal entity, separate from you as an individual. Let’s look at some of the advantages and disadvantages of incorporating your business.
Benefits of an incorporation
Limited liability means your exposure to any retribution should your business not do well is limited
The ability to transfer ownership if you sell your business
Raising capital from investors and financial institutions is easier
There are a number of possible tax advantages that can be explored
Be better prepared for legacy and estate planning as your business theoretically exists forever
Considerations and risks of an incorporation
Stricter regulations, you’ll need to ensure all your paperwork is in order
Setting up a corporation is more expensive than a sole proprietorship
There’s a lot more paperwork involved with corporations, including yearly documentation that must be filed with the government
Including shareholders and directors opens up the potential for internal conflict
You will have to maintain ongoing paperwork filings to continue to run