Most businesses come in one of three flavours, and we can help you pick the right one.
A proprietorship is you doing business under a business name.
Simple to create and maintain, proprietorships are the most common businesses in the small business sector. They have far less maintenance overhead in legal and accounting costs than other partnerships or corporations. They also offer few tax advantages compared to corporations, and they don’t provide the liability shield of a corporation.
A partnership is two or more people carrying on business together with the common goal of earning a profit.
A basic partnership is like a proprietorship, except that it is owned by two or more people; however, it can carry more risk. Each partner is liable for the risk undertaken by the others. Also, equal partnership might not reflect the what each partner brings to the table, or the work they put into the business. These issues can be sorted out and the risks reduced by a good partnership agreement. A good partnership isn’t cheap, but it’s a lot less expensive than not having one.
Usually, my small business clients opt for the formal structure and built-in protections of a corporation, rather than a partnership. In some cases, though, partnership is the ideal structure. If that’s the case for you, we’ll work with you to make it as predictable and successful as possible.
A corporation is a whole new person under law. A corporation can employ people, enter into contracts, own property, pay taxes, sue and be sued, and outlive its founders.
Creating a corporation, also called “incorporating a company,” requires a few things (this list is specific to British Columbia corporations):
- A set of rules governing its behaviour and structure, which are called “articles”;
- A list of directors who tell it what to do;
- A share structure, which sets out how the company is divided and who owns those divisions;
- A list of shareholders;
- A registered and records office that will comply with the rules in the Business Corporations Act (British Columbia); and
- Registration with the provincial Corporate Registry.
Corporations have certain advantages in terms of liability protection, taxes, and the ability to sell a business. They also have setup and maintenance costs.
Come talk to us about your business, and we’ll work with you to set up the structure best suited to your needs.