The Different Types of Companies You Can Register In Ontario
Are you interested in starting your own? Before you can really get your business up and running, there’s a process you first need to go through.
If you haven’t owned a business before, chances are that you are not familiar with the registration process. That’s why we’re here to help you out!
We want you to have all of the right information about setting up shop so that you’ll be ready to go when it comes to registering your company.
As you are looking to register your new Ontario business, you’ll find that there are a few different company structures that you can register. Since this is your first business, you want to make sure that you’re picking the company structure that is right for you.
Want to learn more about the different types of companies you can register as? Here is a list of some of the different types of companies you can register in Ontario:
Becoming a sole proprietor is very popular among businesses today, and is one of the business structure types you can choose to register.
If you decide to register as a sole proprietorship, that will mean that you are the sole owner of the business. You will be the one in charge of all of the obligations and debts for your company.
As a sole proprietor, you will be able to keep all of your profits. However, you will also be personally liable for anything that goes wrong. If your company is in debt, a creditor can potentially make a claim on both your personal and business assets.
The sole proprietorship business type has its pros and cons. Some of the advantages of being a sole proprietor include giving you full control over your business, making all of the profits, and the lower registration costs.
The cons of a sole proprietorship business are that you are the only one that is liable for everything, your income will be taxable at your personal rate, you will need to renew the business registration every 5 years, and your business name will not be protected.
Another company registration option is to register your business a corporation. In Canada, this is the most common company type.
Since the corporation is a separate legal entity, the way your business would be taxed is different than it would be if you were a sole proprietor. You would need to file a separate corporate tax return.
Your business can become a corporation on the federal or provincial level. Also, since you will be a shareholder rather than a sole-proprietor, you will not be individually liable for the business. since the corporation is a separate legal entity you will not be personally liable for the business, except where you have made a personal guarantee or been negligent.
The pros of making your company a corporation include: you do not have the same personal liability, the company is its own legal entity, your company’s name will be protected, you might be able to pay a lower tax rate, and you will be able to transfer the company’s ownership if you wanted to.
The cons of structuring your business as a corporation are: you will need to file a separate corporate tax return, and setting up a corporation costs more than other company types.
Partnerships have more than one person making a decision for the business, but are not incorporated.
There are a few types of partnerships: The General Partnership, the Limited Partnership, and the Limited Liability Partnership.
If you have a general partnership, you and your partner(s) will be liable for all of the company’s debts. In a limited partnership, one person can be a partner without really contributing to the operations, while the other partner handles the rest. Limited liability partnerships are mostly for professionals, such as doctors and lawyers.
Make sure that you and your partner create terms that you both agree on before going into business together. You want to be sure that you will be able to trust your partner with anything related to your business. When creating the agreement, you should consider hiring a lawyer to take care of it for you and to avoid any disputes. Part of this agreement should include details on how the profits will be split.
Partnerships have their advantages and disadvantages, as do all of the other company structure types. One of the partnership’s main advantages is that it is easy and cheap to create a partnership.
Another great pro of a partnership is that you could have a tax advantage. If your business loses money, you and your partner can offset personal income with this loss to help lower your personal income tax requirements.
While there are clearly some pros to having a partnership, it’s time to now talk about the cons. One of the cons of having a partnership is that legally, there is no difference between you and your company.
Another huge con is that you and your partner will be liable for everything related to the business, and so you could be personally liable for business debts.
Something to consider when thinking about forming a partnership is where to find the perfect partner. Sometimes, it can be difficult to find the right partner.
Additionally, someone you initially decide to partner with may start to have conflicts with you later on. If you and your partner(s) are constantly having disputes, the partnership will probably not work out as well as you might have hoped.
Lastly, a big disadvantage to having a General Partnership is that you will be financially liable for any of the business decisions that your partner chooses to make. For instance, if your partner all of a sudden decides to break a contract or put the business into debt, you will be on the hook if things go badly.
You are looking to start a business. There are quite a few options for structuring your business. Before you register your business, think about what you want your company to achieve, and which structure will help you achieve that goal.
While each of these different types of companies have their pros, they also have some important cons to consider. Do your research in order to make the best decision for your business. If your not sure, you can always consult a lawyer to help you out.
If you would like to learn more about registering your Ontario business, and the different types of companies there are, feel free to reach out with any questions you may have.