To start a business, it’s important to understand the different business structures in Canada. No matter in which jurisdiction (federally or provincially) you are planning to start your business.
It impacts factors like liability, taxation, and future potential growth, as well as your ability to raise capital and run your business efficiently.Understanding the various types of business structures that is available in Canada is the first step toward making an informed decision for your entrepreneurial dreams.
We will discuss the primary business structures in Canada specially Corporation, Sole Proprietorship, partnerships, cooperatives, and Cooperative and Non-profit. And their key features, advantages, disadvantages and how to register your chosen Business structure in Canada.
Sole Proprietorship
Sole Proprietorship is the easiest and most common structure. This business is basically Owned and operated by one person. This business is ideal for single owner. There’s no formal registration required, and you report business income on your personal tax return.
Advantages of Sole Proprietorship:
- easy and inexpensive setup
- owner has direct control over all decisions
- low cost, and
- all profits belong to business Owner.
Disadvantages of Sole Proprietorship:
- unlimited personal liability.
- personally responsible for all business debts.
- Limited fundraising options, and
- business can cancel by owner anytime or death
Partnership
A partnership business is a business where two or more individuals share their profits, losses, and management responsibilities.
There are three types of Partnership exist in Canada:
A formal partnership agreement is recommended to avoid ownership disputes
Advantages of Partnership:
- Combines resources and skills.
- Profits and losses are distributed according to the agreement.
- Profits is taxed at the personal income tax rate
Disadvantages of partnership:
- Partners are jointly and individually liable for the actions of the other partners.
- Unlimited liability for all partners.
- Disagreements between partners can disrupt the business.
Corporation
A corporation is a legal entity that is distinct from its owners. Here owner are shareholders.
Corporation has limited liability protection that means shareholders’ personal assets are protected from business debts. Form a corporation requires complex setup and ongoing compliance procedures than other business structure.
Advantages of Corporation:
- Limited liability for the owners.
- Raise capital by issuing shares,
- Perpetual existence compared to unincorporated businesses
Disadvantages of Corporation:
Higher costs for setup and maintenance.
More complex tax filings and regulations.
Profits may be taxed twice
Cooperative
A cooperative is a business that is owned and controlled by its members democratically. All Profits are typically distributed based on member participation or patronage rather than solely on investment. There are different types of cooperatives in Canada. It can be with share Capital or without share Capital. Most of the time it forms association for producer, worker, consumer, and multi-stakeholder.
Advantages of cooperative:
- Focuses on member needs and community development.
- Can raise capital through member investment.
- Everyone has right to vote, regardless of their financial investment.
- Profits are distributed among members.
Disadvantages of cooperative:
- Complex to organize
- Decision-making can be slower due to the democratic process.
- May require specialized knowledge to operate effectively.
Non-Profit Organization
Non-profit organizations are incorporated to operates to fulfill a social, educational, religious, or charitable purpose rather than to earn profits for its owners.
It prioritizes a social cause over generating profits. Surpluses are reinvested back into achieving the organization’s goals.
Advantages of Non-profit organization:
- Eligible for tax breaks and charitable donations.
- Can attract grant funding to support their cause.
- Ability to receive grants and tax-deductible donations.
- Exemption from income tax.
Disadvantages of Non-profit organization:
- Strict regulatory and compliance requirements.
- Limited ability to generate profit for reinvestment.
- Cannot distribute profits to members or stakeholders.
There are some Considerations factors when making your choice
Liability: How much personal risk are you comfortable with?
Ownership: Will you be running the business alone or with partners?
Growth Plans: Do you envision expanding your business significantly?
Tax Implications: Consult a tax professional to understand the tax implications of each structure.
Provincial vs. Federal Incorporation: You can incorporate federally or provincially. Provincial incorporation is sufficient if you plan to operate in one province. Consider federal incorporation Benefits if you intend to operate across Canada.
Business Name Registration: Regardless of the structure, register your business name to protect it.
Registering Your Business Structure in Canada
Choosing the right business structure is just the first step. After choosing business structure your next step to know the process of registration for each common structure in Canada:
How to Register Sole Proprietorship
- Choose a Business Name: Select a unique name and make sure it’s not already in use for other existing business or not already trademarked. RegiCorp offers unlimited name search in our all package.
- Business Name Registration: Register your business name with the provincial/territorial registry office. You can not register Sole Proprietorship federally. RegiCorp online website can help you register your business easily and quickly, at an affordable price.
- Get Necessary Licenses and Permits: Depending on your business type, you may need specific licenses or permits from municipal, provincial, or federal authorities.
- Register for Taxes: If applicable, register for the Goods and Services Tax/Harmonized Sales Tax (GST/HST) with the Canada Revenue Agency (CRA).
How to Register Partnership Business
- Choose a Business Name: Decide on a unique name for your partnership. You may use RegiCorp’s free Business name search before registering your business name.
- Register the Business Name: Like Sole Proprietorship, you can not register your partnership business in federally, for this business structure you must register it provincially or territorially.
- Draft a Partnership Agreement: While it is not mandatory to have a Partnership agreement, it’s highly recommended to have a written partnership agreement outlining the roles, responsibilities, and profit-sharing among partners. RegiCorp offers fully online based Partnership Agreement by giving just your information.
- Obtain Licenses and Permits: Like Sole Proprietorship you may need to get Licenses and Permits depending on your business industry. Ensure you have all necessary local, provincial, and federal licenses and permits.
- Register for Taxes: Register for GST/HST with the CRA if your business meets the criteria.
How to Register Corporation
- Name Your Corporation: Choose a unique name and ensure it meets the naming requirements for corporations in Canada. Every Province or jurisdiction has their own rules for name corporation name. Most provinces requires, A NUANS Report (Newly Upgraded Automated Name Search) to ensure the name isn’t similar to existing corporations. . You may use RegiCorp’s free corporate name search before registering your corporation. Even RegiCorp’s all Corporation package include unlimited name search.
- Articles of Incorporation: Articles is like a constitute of a corporation. You should carefully file your Articles of Incorporation with the federal government or your province/territory. This includes details about the corporation’s structure, number of directors, and share types. RegiCorp offer three types of Articles of Incorporation you can choose according to your corporation. You may change articles of incorporation later, but it is time consuming and costly. It is highly recommended to consult a professional or RegiCorp corporate specialist before choosing your articles of incorporation.
- Register Your Corporation: After filing Articles of incorporation, you need to register your corporation in any other province or territory where you plan to do business. You may consider Federal corporation or provincial corporation. But it depends on your future goal and ambition. See the Benefits of a Federal corporation.
- Get Necessary Licenses and Permits: You may need Necessary Licenses and Permits for your business. Check our free business license requirements checker or contact our any agent to check for any required local, provincial, or federal licenses or permits.
- Register for Taxes: Apply for a business number and any necessary tax accounts with the CRA, including GST/HST, payroll, and corporate income tax.
How to Register Non-Profit Organization
- Select Jurisdiction: You can incorporate a non-for-profit federally or provincially in Canada
- Define Your Mission and Vision: Clearly write the purpose of your Non-profit’s and its mission & vision.
- Choose a Name: Select a unique name that reflects your mission and check for its availability. Obviously must follow the regulation of naming a non-profit corporation.
- Incorporate Your Non-Profit: File articles of incorporation with the relevant provincial/territorial body or the federal government, depending on whether you wish to operate locally or nationally. There are two types of Articles of incorporation one is Future intension of charity, and another one is non-future intension of charity.
- Create Bylaws: Draft bylaws in accordance with provincial/territorial or federal requirements. Outlining how your organization will be governed, organised, and operate daily basis.
- Register for Charitable Status (if applicable): If you want to issue tax receipts for donations, apply for charitable status with the CRA. RegiCorp help you to Register Charity account with CRA.
- Obtain Necessary Licenses and Permits: You may need to get necessary Licenses and Permits depending on your organisation’s needs. Ensure compliance with any specific local, provincial, or federal requirements.
- Register for Taxes: Register with the CRA for any necessary tax accounts, such as GST/HST, if your organization will engage in taxable activities.
How to Register Cooperative
- Create a Founding Group: Gather a group of people who interested in forming the cooperative. Most cooperative are forming for a common interest of it’s members.
- Select Jurisdiction: You can incorporate Cooperative federally or provincially in Canada
- Develop a Business Plan and Bylaws: Outline how the cooperative will operate, including its mission, vision, member contributions, and governance structure.
- Cover letter: Its includes contact information of the person filing the information, clearly stating the type of cooperative (with share with capital or without share capital)
- Name Your Cooperative: Choose a unique name that complies with provincial/territorial or federal regulations. For this you need a Nuans Report.
- Incorporate Your Cooperative: Submit your incorporation documents, including your bylaws and a list of directors, to the appropriate provincial/territorial authority. Currently RegiCorp is developing the business structure for out customer. You may sign up for latest update and once our development is complete, we will notify you.
- Register for Taxes: If required, register for GST/HST, payroll, and other relevant taxes with the CRA.
How RegiCorp can help you Register these Business Structure
RegiCorp is the second largest Business formation Service Provider after Ownr. We are specializing in assisting entrepreneurs and business owners with the registration and incorporation process. We can significantly simplify and expedite the setup of various business structures in Canada.
Here’s how RegiCorp might assist in registering each type of business structure: Sole Proprietorship, Partnership, Corporation, Cooperative, and Non-Profit Organization.
Sole Proprietorship
- Name Searches and Registrations: RegiCorp can help you choose a unique business name and handle the registration process with the provincial/territorial registry office. We offer unlimited name search in your all business registration process.
- Licenses and Permits: We can help you to identify the specific licenses and permits you need based on your business activities and assist in applying for them.
- Tax Registrations: RegiCorp can guide you through registering for the Goods and Services Tax/Harmonized Sales Tax (GST/HST) and other relevant tax accounts with the Canada Revenue Agency (CRA).
Partnership
- Business Name Registration: RegiCorp can facilitate the process of registering your partnership’s name with the appropriate Government authorities.
- Partnership Agreement: We can draft a comprehensive partnership agreement that outlines the roles, responsibilities, and profit distribution among partners.
- Licenses, Permits, and Tax Registrations: Just like with sole proprietorships, RegiCorp can assist in obtaining the necessary licenses, permits, and tax registrations.
Corporation
- Name Registration and NUANS Report: RegiCorp can conduct an unlimited NUANS search to ensure your chosen name is available and assist with the registration process.
- Articles of Incorporation: We can guide you through preparing and filing your Articles of Incorporation, whether you’re incorporating federally or provincially. Currently we offer three types of Articles of Incorporation: One share class, two share class, and customize share class. You can choose among them based on your corporation needs and goals.
- Extra-Provincial Registration: If you plan to operate in multiple provinces, RegiCorp can help register your corporation in those jurisdictions. Even you can change your current jurisdiction.
- Licenses, Permits, and Taxes: RegiCorp can assist in obtaining any required licenses and permits, as well as setting up tax accounts with the CRA, registering WSIB/WCB, Food export-import License etc.
Cooperative
- Formation and Planning: RegiCorp can assist in developing a business plan, and drafting bylaws tailored to your cooperative’s needs.
- Name Registration: We can help select and register a unique name for your cooperative. In every Cooperative package we offer unlimited name search.
- Incorporation and Registration: RegiCorp can guide the incorporation process with the appropriate Federal/provincial/territorial government office and assist with any additional registration needs.
- Tax Registrations: We can facilitate the process of registering for GST/HST and other relevant taxes with the CRA., WSIB/WCB, Food export-import License etc.
Non-Profit Organization
- Incorporation Guidance: RegiCorp can assist in drafting and filing the articles of incorporation and help ensure that your non-profit complies with federal or provincial legislation.
- Charitable Status Application: We can guide you (If applicable) through the application process for charitable status with the CRA, including preparing the necessary documentation.
- Licenses, Permits, and Taxes: RegiCorp can help identify and apply for any required licenses and permits, as well as assist with registering for tax accounts, WSIB/WCB etc.
As a second largest Business Formation provider in Canada, RegiCorp offers a streamlined, one-stop solution for navigating the complexities of business registration in Canada.
By leveraging our expertise, every business owner can save time and avoid common pitfalls associated with the registration process and filing Articles of Incorporation. Additionally, RegiCorp’s professional network, including legal and tax experts, can provide valuable insights and support to ensure that your business is set up correctly and compliantly from the start.
You can easily contact with us by Phone, Email, or Live chat. You will find FAQ section to clarify your answer as well.
General FAQs: Registering Your Business Structure in Canada
Q: What are the main types of business structures in Canada?
A: The main types of business structures in Canada are Sole Proprietorship, Partnership (including General Partnerships, Limited Partnerships, and Limited Liability Partnerships), Corporation, Cooperative, and Non-Profit Organization.
Q: I’m a single entrepreneur. Do I need to register my business?
A: If you operate under your own legal name and don’t require a business license, formal registration might not be necessary. However, registering your business name is recommended if it differs from your own.
Q: Do you need to renew your business licence?
A: It depend on which province/ jurisdiction you register your business in. You may be required to re-register or renew your Master business License in Ontario (Sole Proprietorship, Partnership, Trade Name) in every 5 years. . In Saskatchewan you also need to renew your unincorporated business in every three year. When to renew varies depending on the province, so please be sure the check for the province you registered in. You won’t receive a reminder, no worries we will remind you. Just subcribe our free Renewal reminder services.
FAQs on Choosing the Right Business Structure
Q: What’s the difference between a sole proprietorship and a partnership?
A: A sole proprietorship is owned and operated by one person. In a partnership, two or more co-owners share profits, losses, and management responsibilities.
Q: How do I decide between a Sole Proprietorship and a Partnership?
A: The choice between a Sole Proprietorship and a Partnership often depends on whether you plan to run your business alone or with one or more partners. Consider a Sole Proprietorship if you prefer full control and simplicity.
On the other hand, choose a Partnership if you’re looking to share responsibility, capital, and expertise with others, but be prepared for joint liability.
Q: Which structure offers limited liability protection?
A: Corporations and, in some cases, cooperatives offer limited liability protection, shielding owners’ personal assets from business debts (with some exceptions). Sole proprietorships and partnerships do not have this protection.
Q: What are the main advantages of incorporating my business?
A: Incorporating your business offers limited liability protection, potentially lower corporate tax rates, and easier access to capital. It also provides a level of credibility and permanence in the business world. However, it comes with higher setup and maintenance costs and more regulatory requirements.
Q: Can a Non-Profit Organization be profitable?
A: A Non-Profit Organization can generate surplus revenues, but these must be reinvested back into the organization to further its social, educational, religious, or charitable purpose. It cannot distribute profits to members or stakeholders.
Q: I want to start a social good venture. Should I choose a non-profit or a cooperative?
A: Non-profits prioritize social causes and reinvest surpluses into achieving their goals. Cooperatives are member-owned and focus on serving member needs while potentially generating some profit.
FAQs on Registering Business Structures with RegiCorp
Q: How can RegiCorp help with the registration of a Sole Proprietorship?
A: RegiCorp can assist with name selection and registration, identifying and applying for necessary licenses and permits, and setting up tax accounts with the CRA, WSIB/WCB account and simplifying the process and ensuring compliance.
Q: What services does RegiCorp offer for someone looking to start a corporation?
A: RegiCorp offers comprehensive services for starting a corporation, including conducting NUANS searches, preparing and filing Articles of Incorporation, assisting with extra-provincial registration, obtaining necessary licenses and permits, and facilitating tax registrations.
Q: Can RegiCorp help me with all structures?
A: The answer is Yes. We can help with tasks like name searches, document filing, and obtaining licenses, set up CRA and Registering WSIB/WCB account.
Q: Can RegiCorp assist in applying for charitable status for a Non-Profit Organization?
A: Yes, RegiCorp can guide Non-Profit Organizations through the process of applying for charitable status with the CRA, including preparing and submitting the necessary documentation and ensuring compliance with the regulatory requirements.
Q: What is the advantage of using a service like RegiCorp to register my business?
A: Using a service like RegiCorp offers convenience, efficiency, and peace of mind. They can navigate the complex registration process, ensure compliance with all legal and tax requirements, and potentially save you time and money by avoiding common pitfalls.
Q: Does RegiCorp provide legal advice?
A: While RegiCorp can guide you through the registration process and connect you with legal professionals, it typically does not provide legal advice directly. They can facilitate access to legal experts who specialize in business law to ensure that your business structure aligns with your needs and complies with Canadian laws.
Q: How much does a business registration service cost?
A: Costs vary depending on the service and complexity of your structure. we charge a competitive price that is lesser than other.
Q: Should I use RegiCorp for registering my business?
A: From above discussion you already know about RegiCorp. You can Consider factors like our experience in your province and chosen structure, as well as our service offerings and pricing compared to other providers.
These FAQs aim to clarify common questions entrepreneurs might have when choosing and registering a business structure in Canada, with a particular focus on how services like RegiCorp can streamline and support the process.