Business Structure Comparison
Legal Structure Comparison Table
Sole proprietorship | Partnership | Corporation | Non-profit corporation | |
|---|---|---|---|---|
OWNERSHIP ISSUES | ||||
Legal Status | Business has same legal personality with owner. | Business has same legal personality with owner. | Business has a completely distinct legal personality from its owners. | Organization has a completely distinct legal personality from its members. |
Limited Liability Protection | No | No | Yes | Yes |
May issue shares to attract investors | No | No | Yes | N/A There are no owners, just members |
Ease of raising capital | Most difficult | Difficult | Easiest and most flexible. | Not applicable. Obtaining charitable status to issue tax deductible receipts assists greatly in soliciting donations. |
Decision-Making and Management | Single owner has total control. | Generally majority ownership rules, subject to partnership agreement limitations, and type of partnership. | Directors and Officers, subject to shareholder agreements and exceptional situations provided in law. | Generally majority membership rules, subject to by-laws exceptional situations provided in law. |
Business Name protection | Minimal. Trademark registration is best. | Minimal. Trademark registration is best. | Yes. However, trademark registration protection gives greatest protection. | Yes. However, trademark registration protection gives greatest protection. |
GETTING STARTED | ||||
Ease of Formation | Yes | Yes | Moderate | Moderate |
Initial filing with Corporate Registry(+ filing fee) required for creation | Simplest and least expensive. | Relatively simple and inexpensive. | Costs more. (Using CorpCentre saves you time and money!) Government filing fees are from $200 to $600. | Costs more. Government filing fees are from $100 to $500 |
Ongoing annual corporate filings (=fee) required | Depends on province. Some annual, pluriannual or until removal. | Depends on province. Some annual, pluriannual or until removal. | Yes | Yes |
Legal and administration costs | Add income/loss to personal tax returns. | Add income/loss to personal tax returns. | Need to file separate tax returns for corporation and prepare financial statements. | Need to file separate tax returns for corporation and prepare financial statements. |
Continuity of Life | Ends with life of owner | May continue after the death of 1 of the owners. | Indefinite lifespan as a corporation has a district legal personality from its owners. | Indefinite lifespan as a corporation has a district legal personality from its members. |
Number of Owners | 1 | 2 or more | Minimum 1 and can typically go up to 50 owners. Subject to securities laws of “private issuer”. More than 50 may require prospectus or securities filings. | Not applicable. Non-profits have members and not owners. Minimum is usually 3. |
Ease of transferability of ownership | Can only be a sale or transfer of assets of the business. | Some flexibility. | Most flexibility. | N/A |
Distribution of voting power | Not applicable as the single owner makes all decisions. | Can be agreed in a partnership agreement. | Most flexibility. Can create different classes of shares and rights. Can be subject to shareholder agreement. | Majority. |
TAXATION | ||||
Tax Year | Calendar year | Calendar year | Can select any year-end tax year | Can select any year-end tax year |
Owners can report business profit and loss on their personal tax returns | Yes | Yes | No | Not applicable |
Ability to carry-forward losses from one financial year to a subsequent financial year | No | No | Yes | Not applicable |