Starting a business? Should you incorporate or not?

When starting your business, one of the first decisions you are faced with is a big one – Do I register as a sole-proprietor or do I incorporate? This decision is not one that is typically made lightly. It generates a whole bunch of additional questions to think about when it comes to running your business and getting some good advice is a must! 

We help entrepreneurs with this all the time and we have partnered with Ownr.co to make this process even easier! But first, let’s start with a brief explanation of what each one is and what they mean. Understanding what each of them are and some of the benefits and risks associated with each as well as getting an idea of what makes the most sense for you and your business at this stage.

Sole Proprietor 

Sole Proprietor is often considered the same as self-employed and typically you are the sole owner of the business. As a sole proprietor, you are responsible for everything personally and are taxed personally on the income that is generated from your business activities. If there are business losses, they can also affect your personal tax situation.

What are the benefits of a sole proprietor type business?

• Very simple and quick to setup
• You are in full control when it comes to making decisions for the business
• Low start-up costs and sometimes lower annual costs when it comes to tax preparation

What are the risks associated with a sole proprietor type business?

• You are legally liable personally. This includes being personally responsible for business debts incurred
• If your business takes off and becomes super-profitable, you will pay more taxes
• Raising money is more difficult. Many lenders require you to be incorporated in order to provide financing or issue a loan.

Incorporation

Incorporating a business is a big step. When you chose to incorporate, you are creating a new legal entity called a corporation, also known as a company. This corporation or company will have the same rights and obligations under Canadian law as a natural person. It can also acquire assets, get financing, enter into contracts and more. 

What are the benefits of incorporating?

• Better access to financing & capital
• Potentially lower corporate tax rates
• Unlimited life span with the ability to transfer ownership if you sell the business
• Owners are not personally liable for the business’s financial and legal liabilities
• Many tax advantages available only to corporations

What are the risks associated with an incorporated business?

• Setting up a corporation is more expensive than a sole proprietorship
• There’s a lot more paperwork involved with corporations, including yearly documentation that must be filed with the government
• Shared decision making when there are additional shareholders and directors 
• Stricter regulations when it comes to paperwork and filings – you’ll need to ensure all your paperwork is in order and maintain filings to continue to operate
• A little more expensive at year-end to complete the paperwork and tax filings

Now that I know the differences and some of the benefits and risks – What’s Next?

It’s time to choose your company name and register it. This used to be a much more difficult process back in the day. Now there are government or other official websites which make it very simple to register and set up your entity. This is why we partnered with Ownr. They offer a really easy process and wonderful website to make registering your company with the government. 

At the time of writing this blog, Ownr is able to register companies in Ontario, Alberta and BC. You can also choose an Ontario based Federally incorporated entity as well. They are currently working on the other provinces so stay tuned for more details.

Want to save an additional $50?? By signing up through one of our links, you can immediately save $50! *  Update: As of January 2021, signing up through one of our links now saves you 20% off your purchase.  

Sole Proprietor Registration

Click here to register your sole proprietor business with Ownr. 

You can also get help creating a logo here using the power of AI.

Want to get your registration for free? Get your money back when you open an RBC business bank account within 60 days of registration. See Details.

Incorporation

Click here to register your incorporation with Ownr. 

You can also get help creating a logo here using the power of AI.

Get an additional $300 when you open an RBC business bank account within 60 days of incorporation. See Details.

 

Centrosome is here to help if you have additional questions or need to get someone to set up your cloud-based bookkeeping and accounting systems as well as your IT systems including GSuite, Office 365, Domain Names, Web Hosting, and more. Contact Us today for a free consultation.

 

* Centrosome Inc has partnered with Ownr and will receive a small affiliate fee for the referral. There is no additional cost to you for signing up.