One of the first and most important legal steps you’ll need to take in setting up your small business is choosing the business structure you want.

There are three main legally recognized businesses:

1. A sole proprietorship is an unincorporated business owned and operated by one individual, under his or her name or a trade name, and where there’s no legal distinction between the owner and the business. That means all assets are owned and debts must be paid by the individual. A sole proprietorship is the easiest kind of business to set up; the owner has full decision-making power, keeps all profits from the business and pays only personal taxes, not corporate taxes.

2. A partnership is similar to a proprietorship, though more than one person shares control of the business. Again, all assets are owned and all personal taxes and debts are paid by the individual partners who, together, have full decision-making power. A partnership can be easy to set up but like a sole proprietorship, partners can be exposed to high levels of personal liability if financial problems arise.

3. A corporation offers the most safety from liability because it exists as a legally separate entity from the people who own shares in it. Incorporation also ensures the business can continue to operate if any members of the business leave.

STAPLES and CorporationCentre.ca, which has registered over 10,000 businesses since 2001, make it easy and affordable to register your sole proprietorship or partnership or incorporate your business online.

Questions? You can learn more here about which type of business makes the most sense for you – or send us your questions. We’ll do our best to answer them.

Which type of business makes the most sense to you?