A sole proprietorship is a business conducted by one business owner under a name other than his or her own.
Being a self-employed person is a one-person business and is usually the simplest way to establish a business. A self-employed person has unlimited liability, which means that the self-employed person is fully responsible for all debts and claims related to their business.
If a business owner carries on business under their own name, the business name must be registered with the Department of Government Services (MGS) under the Business Names Act and the relevant fees must be paid.
The validity period of corporate name registration is five years, and it is necessary to renew the registration when it expires.
Partnership
It is a business jointly operated by two or more business owners.
A partnership is a business between two or more people that is carried on together for profit. In a general partnership, all partners participate in the management of the business and are liable for all claims and debts of the business.
Partners should, with the assistance of a lawyer, develop a partnership/shareholder agreement to clarify their respective rights, obligations and shareholding ratios to avoid further disputes when the business undergoes major changes or is dissolved.
The names and addresses of all partners must be registered with MGS and the relevant registration fees must be paid. Partnership registration must be renewed every five years.
Self-employed or in partnership?
The first thing to do when starting a company is to choose a business structure that suits your needs. So which one is more suitable for you, self-employment or partnership?
Self-employed business It is a business owned by an entrepreneur. It is the easiest and cheapest type of business to register and manage. Self-employment is 100% "sole proprietorship" and all business decisions are made by oneself.
Partnership A partnership is a business jointly owned by two or more business owners. It is a relatively simple to set up and has low management costs. There are two types of partnerships: general and limited.
• General Partnership: All partners share in the profits and losses of the business and are jointly liable for all liabilities.
• Limited partnership: It is composed of limited partners. Limited partners do not participate in management, are not responsible for debts, and only enjoy a share of net profits.
Generally speaking, fewer people choose the partnership form.
Self-employed business or partnership package service totaling $226 (completed on the same day, does not include tax registration number but includes 15 minutes consultation)
Common features
• Business assets owned by: All business assets are owned by the business owner individually or jointly by partners.
• Assume unlimited liability: Under the law, a business and the people who run it are considered the same legal person. This means that the business owner or partner will be liable for any debts, liabilities or obligations that their business may incur. If these liabilities are greater than the business assets, the owner or partner may have to declare personal bankruptcy.
• Register company name and tax account: There are no legal requirements for setting up a sole proprietorship or general partnership other than registering the business name. If the business owner or partners intend to hire employees or charge GST/HST or provincial sales tax to customers, the business owner will also need to register for the relevant tax accounts.
• Self-employment: Business owners and partners are considered self-employed, not employees of the business.
• Corporate and personal income tax filing: Owners and partners are required to keep separate books and records for their business; however, they only need to file one individual income tax return each year. If the business incurs a loss, the owner or partner can use the loss to offset their taxable personal income if they have income from other sources (such as through investments or other work).
• Re-establishing a partnership after one of the partners dies: When the business owner or one of the partners dies, the business ends; if the remaining partners wish to continue the business, they need to re-register the company.
The difference between self-employment and partnership
Management Responsibilities:
• Self-employed, enjoying independence and autonomy, with full control, management and ownership decisions over the business.
• Partners share the responsibility for the daily management and operation of the business and make joint decisions. (Except for limited partners, whose responsibilities are specified in other contracts.)
Funding provided by:
• Self-employed, usually funding their business with personal savings, a bank loan or line of credit. Start-up capital may be limited.
• Partners, with similar funding methods, but with the ability to pool resources, the amount of start-up capital available may be significantly increased.
Partnership contract
A partnership contract is optional for a general partnership, but it is recommended that you sign a partnership contract to avoid disputes and conflicts.
Despite the best intentions of all partners, disagreements, conflicts, etc. may arise during the course of the business, including regarding the company structure, management or operations. Without a written partnership agreement, resolving or dealing with an unexpected termination of the partnership can be difficult and costly.