If you are the only owner of a small business, you can set it up as a sole proprietorship. As a sole proprietor, you make all the decisions for the company; you might consider this to be an advantage if you like making decisions without input from others. A sole proprietorship is relatively easy to set up. You only need to register your business name and apply for a permit and business licence. You also may need to register to collect the goods and services/harmonized sales tax if your business earns more than $30,000 annually. Aside from paying any workers you hire, the rest of the profits belong to you. If your business fails, you can deduct losses when you file your personal income taxes. The biggest disadvantage of being a sole proprietor is that you are liable for any debts you incur. For example, if you open a new credit card account to purchase equipment, your failure to make payments negatively impacts your personal credit rating. Failing to pay a secured business loan could result in the loss of your personal assets. A sole proprietorship works well for when you’re just starting out. You may wish to incorporate to lower your personal liability as your business grows.
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.