|
There are many different methods of carrying on business. This article
will address three: the sole proprietorship, the partnership and the corporation.
In a sole proprietorship, the individual will carry on business on his or her own behalf.
He or she is the sole owner of the business and may hire employees. If using a name different
than his or her own, he or she is required to register a business name. A business name registration
is valid for 5 years and can be renewed. As a sole proprietor, the income and losses
of the business are for his or her own account. If creditors wish to sue, they may sue
the individual personally and seize his or her personal assets (with certain exemptions)
to satisfy any judgment.
A partnership exists where two or more persons, whether individuals or corporations, carry on
business together with a view to a profit. The partnership is not, in law, a separate legal entity.
Partnerships are governed by the common law and the Partnership Act. As between themselves,
partners can have a written or oral agreement. A written agreement is preferable, as it provides
a greater level of certainty as to what the partners' rights and obligations are as regards each other.
As regards third parties, each partner is liable for all of the partnership's debts and liabilities.
There are general partnerships and limited partnerships, the rules for which differ.
In a corporation, the owners are called shareholders. The corporation is a separate legal entity
from its owners. It can sue or be sued in its own name. The owners are only liable to the extent
of the property they have advanced to the corporation in exchange for their shares. This is commonly referred to
as the limited liability concept. Other reasons for incorporating may include tax planning.
The corporation will have directors and officers. Despite the limited liability concept, they may be
personally liable for unpaid taxes, employment insurance, Canada Pension Plan, for environmental offences,
and for other matters.
In each instance, consideration should be given as to which form of business organization
to use. In some cases, it may be prudent to consider other forms not described above.
|
