Many people enjoy being their own boss. That means deciding on a structure for your business operations. When you discuss this with your Ottawa lawyer specializing in corporate work, you will be able to make an informed decision based on your needs.
However, as a primer, here is some basic information.
Sole Proprietorship
Under this entity, you are self-employed and the only owner and manager. In this case, you and your business are considered one.
This is a good structure if you want to have direct control over all the operations and finances. The downside is if the business gets into trouble, legal or financial, you personally become responsible. The other party would be entitled to the business assets as well as any or all of your assets.
A sole proprietorship is a good idea if you won’t need outside financing, don’t anticipate any high liabilities, or if any losses won’t significantly affect your lifestyle.
Partnership
This is when two or more people pool their resources and then share profits and responsibilities. There should always be an agreement in place to outline the details.
There are different types of partnerships. A general partnership is where the partners are jointly liable for any losses and debts of the business. A limited liability partnership is generally for professionals like lawyers or accountants.
The pitfalls and benefits of partnerships are similar to that of a sole proprietorship because the partners control the operations, but their personal assets can also be at risk. Another advantage is that resources are pooled, and responsibilities are divided between the parties.
If you don’t mind sharing management and liabilities and don’t expect to be at great risk, this would be a good option.
Corporation
The primary advantage of a corporation is that it is a separate legal entity, and most of the liabilities stay with the corporation and not with the owner.
Corporations provide a tax advantage since they often qualify for a lower tax rate.
The corporation can be financed with the issuance of stocks or corporate bonds.
However, corporations are also more regulated and more closely monitored by state and provincial governments. There is significantly more record-keeping since you will need a board of directors and minutes to record.
Getting legal advice
Whatever you are contemplating, it is suggested that you make an appointment with an Ottawa corporate lawyer to see what they have to say about your situation and the best options available.