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Sole Proprietorship explained
Most sole proprietorships tend to be small and localized. The advantages commonly associated with carrying on a sole proprietorship are the following:
- ease in which to start and dissolve the business;
- low start-up expenses.
There are, however, significant disadvantages which may lead you to decide against choosing this business structure:
Unlimited liability
The owner is personally responsible for all of the debts and obligations incurred by the business. The owner is thus liable to the full extent of his/her personal assets for all of the liabilities and losses which are incurred by the business.
Hard to raise Capital
A sole proprietorship does not allow to share in the ownership of the business. No partners or shares. So if you ever want to raise capital you will need to change its legal structure.
Taxes
As a sole proprietorship you need to report all income of your business on your personal tax returns. If you have losses in the first year you can’t generally carry forward those losses to offset future profits.
Corporation vs. DBA: what’s the difference?
Several important differences between a corporation and a DBA
Corporation
How its unique
- Distinct legal personality from its owners (called shareholders) so exists beyond the lifetime of any founder
- Limited liability protection for personal assets
- Best to raise capital from investors
- More flexibility regarding taxation
Drawbacks
- Higher starting and operating costs
- More compliance requirements i.e. more government filings and paperwork
DBAs - Doing Business As (Sole Proprietorship)
How its unique
- A sole proprietorship is owned by one individual and does not exist apart from the owner.
- Easiest and least expensive business to form.
- Little paperwork – business income included in personal tax returns
Drawbacks
- NO limited liability protection from personal assets
- Limited growth and investment potential
To find out more about which business structure is best for your click here.
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Sole Proprietorships Defined
When starting a business everyone knows that you need to “register” your business with the government. But it can get really confusing because there are many different kinds of “registrations” and people or websites don’t always distinguish between them.
When talking about a “Business Registrations” we are typically talking about what is called a “sole proprietorship” registration. A sole proprietorship is the simplest form of operating a business that is owned by one individual. The business has no existence apart from the owner. Only one owner is responsible for making all of the business decisions and, therefore, earns all the profits, but also assumes all of the risks and obligations. The owner includes the income and expenses of the business on his or her personal tax return. You always register your sole proprietorship with the provincial government department or agency that handles business registrations in your province.
To find out more about which business structure is best for your click here.
DBA/Sole Proprietorship Fees and Timelines
* Please be advised that the NEQ (Numero d’entreprise du Québec) is obtained at the time of filing, however, there is a government processing time of approximately 14 business days before the trade name is officially approved.
** Please be advised that the current government delay to obtain a name decision for Saskatchewan is approximately 15 business days. This delay is in addition to the processing times for incorporations and business name registrations.
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