When starting your business, choose the business structure that best suits your needs. There are four types of business structures: sole proprietorship, partnerships, corporations and cooperatives.
SOLE PROPRIETORSHIP AND PARTNERSHIPS
This is the easiest and most common way to start a business, but it does come with drawbacks, and all the responsibility for the businesses’ success rests with you as the owner.
| Pros |
Cons |
| You can register quickly and easily. |
You must renew your registration every 5 years. |
| You can lower the cost of your business registration. |
You and your partners are personally liable for the business. |
| You receive all of the businesses profits directly. |
Your name is not protected. |
| You make all the business decisions. |
Your income is taxable at your personal rate. |
CORPORATIONS
A corporation is a legal entity that separates the business from their owner/operator. You can choose to incorporate federally or provincially and each option comes with own advantages and disadvantages.
| Pros |
Cons |
| Your personal liability is limited. |
You are required to provide annual filings and corporate records. |
| Your business name is protected. |
You will pay more to set up a corporation than other business forms. |
| You can transfer ownership. |
You may be required to prove residency or proof of citizenship. |
| You may qualify for lower tax rates as a corporation. |
|
CO-OPERATIVES (FOR PROFIT AND NOT FOR PROFIT)
A co-operative is a corporation that is organized and controlled by its members. It can be set up to operate as either for profit or as a not-for-profit. Just like a corporation, it can be registered provincially or federally and each option comes with own advantages and disadvantages.
| Pros |
Cons |
| You will have limited liability. |
You will have to resolve conflict among members. |
| Your profits will be distributed among members. |
Your decision making process might take longer. |
| Your co-operative is democratically controlled (one member, one vote). |
You will need all members to participate to succeed. |
(Source: Canada Business Ontario)