In Canada, there are three main types of business entities, each with unique pros and cons. Understanding the differences will help you know where to start, as well as when it may make sense to upgrade or alter the legal structure. The three main business structures are sole proprietorship/partnership, corporation, and cooperative.
Sole Proprietorship
This is the standard “small business” which most Canadian entrepreneurs start with. They are quick to set up and agile, but subject to the owner’s personal tax rate. This type of entity can be owned by an individual (sole proprietorship) or multiple people (partnership). You can register online easily at any time.
Corporation
This structure limits personal liability and provides lower tax rates and other advantages. While a corporation is more expensive and time-consuming to create and maintain, companies with significant revenue and employees generally benefit from incorporating (more on this shortly). Many people incorrectly assume that a corporation has to be a mid-sized or large company. In fact, you can be a one-person corporation if you so choose. Yes, you will have a few additional responsibilities, but you can unlock all of the same benefits, even if you’re a one-person show.
Co-operative
Co-operatives can be for-profit or not-for-profit. If you want to establish a corporation that has multiple partners or for charitable work with special tax benefits, a co-operative may be the best choice.
Whether you want a corporation or a cooperative, incorporating comes with many benefits. Let’s take a closer look at the main reasons most Canadian entrepreneurs plan to incorporate at some point. blogs
