There are three types of business to choose from when starting up your business. They are Corporation, Partnership and Sole Proprietor. Please read the following information and choose which one best fulfills your needs.

Sole Proprietor

You are a sole proprietor (self-employed individual) if:

• your business is not incorporated;
• you have sole responsibility for decision making;
• you receive all profits and are responsible for all losses; and
• you report your business income on a T1 Individual income tax return

A sole proprietorship is a business of one without corporation or limited liability status. The individual represents the company legally and fully. Common proprietorships include part-time businesses, direct sellers, new start-ups, contractors, and consultants.

Advantages of a Sole Proprietorship:

Quicker Tax Preparation: As a sole proprietor, filing your taxes is generally easier than a corporation.
Lower Start-up Costs: Limited capital is a reality for many startups and small businesses. The costs of setting up and operating a corporation involves higher set-up fees and special forms. It's also not uncommon for a lawyer to be involved in forming a corporation.
Ease of Money Handling: Handling money for the business is easier than other legal business structures. No payroll set-up is required to pay yourself. To make it even easier, set up a separate bank account to keep your business funds separate and avoid co-mingling personal and business activities.

Disadvantages of a Sole Proprietorship:

Personally Liable: Your small business in the form of a sole proprietorship is personally liable for all debts and actions of the company. Unlike a corporation or LLC, your business doesn't exist as a separate legal entity. All your personal wealth and assets are linked to the business. If you operate in a higher risk business such as manufacturing or consumables, the cost to benefit ratio is favorable toward a corporate structure.
Lack of Financial Controls: The looser structure of a proprietorship won't require financial statements and maintaining company minutes as a corporation. The lack of accounting controls can result in the demise of your small business. No matter the legal structure of your business, take time to set up the proper financial statements for your company.

Partnership

A partnership is defined as an association of two or more persons to carry on as co-owners of a business for profit. Sometimes articles are required and highly recommended ion by the partners into the business (whether financial, material or managerial) and generally define the roles of the partners in the business relationship.

A partnership exists when each member shares in the management of the business and has personal liability for the business debts and obligations. Each partner is responsible for the actions of the other partner(s). The partnership itself is the business that receives a GST/HST number not each partner.

Advantages of Partnership:

• Shared financial commitment
• Ability to pool resources, expertise and utilize strengths
• Limited start up costs
• Few formalities (mostly applicable licenses)

Disadvantages of Partnership:

• Partners are generally personally liable for business debts and liabilities
• Each partner may also be liable for debts incurred by decisions made by, and actions taken by, the other partner or partners
• Disagreements in management plans, operational procedures and future vision for the business.

Corporation

A corporation is a separate legal entity. It can enter into contracts and own property in its own name, separately and distinctly from its owners. It has to pay tax on its income, and therefore must file its own income tax return. The corporation is the most complex of the three business structures.

A corporation is usually formed under the authority of a provincial government. Corporations which do business in more than one province must comply with the Federal laws regarding inter-province commerce and with the provincial laws, which may vary considerably.

General Corporation (C Corporation):

General Corporation (or "C Corporation") is the most common corporate structure, for medium and large companies in particular. Characteristics include:

• Anonymity of Directors and Shareholders
• Unlimited Number of Shareholders
• Separate Legal Entity
• Taxation of Profits and Losses at the Corporate Level
• Possibility to Raise Capital with Sale of Shares
• Easy Transfer of Shares
• Tax Benefits
• No Obligation for the Shareholders or Directors to be U.S. Citizens or Residents.

Advantages of Corporations:

Limited Liability. One of the key reasons for forming a corporation is the limited liability protection provided to its owners. Because a corporation is considered a separate legal entity, the shareholders have limited liability for the corporation's debts. The personal assets of shareholders are not at risk for satisfying corporate debts or liabilities. Corporate Tax Treatment. Since a corporation is a separate legal entity, it pays taxes separate and apart from its owners (at least in the typical C corporation). Owners of a corporation only pay taxes on corporate profits paid to them in the form of salaries, bonuses, and dividends. The corporation pays taxes, at the corporate rate, on any profits. Attractive Investment. The built-in stock structure of a corporation makes it attractive to investors.

Disadvantages of Corporations:

Formalities. The proper corporate formalities of organizing and running a corporation must be followed in order to receive the benefits of being a corporation. A huge aspect of the corporate formalities that must be followed consists of paperwork. Reports and tax returns must be compiled and filed in a timely fashion; business bank accounts and records must be maintained and kept separate from personal accounts and assets; records must be kept of corporate actions, including meetings of shareholders and Board of Directors. Tax Consequences. C corporations have potential double tax consequences-once when the company makes its profit, and a second time when dividends are paid to shareholders. S corporations can mitigate this tax issue.

Incorporating Your Business

The main advantages of operating a business through a corporation are limited liability, perpetual existence and a reduced tax rate. Federal incorporation offers unique benefits to small businesses. For example, when you incorporate federally, a country-wide search of your proposed name is made, which checks it against other names or trademarks in existence, providing you with stronger name protection. More than 200 000 entrepreneurs have chosen to incorporate federally over the past 20 years.

If you incorporate federally, Industry Canada's Corporations Directorate can offer you various services depending on your specific needs. For instance, if you incorporate on-line, the processing turnaround time is usually within one business day. The fee for on-line incorporation is $200 compared to $250 for a traditional paper filing.

Differences Between Federal and Provincial Incorporation:

Federal Incorporation	Provincial Incorporation
Corporate name protection is second only to Trademark Protection. The corporate name is protected across Canada.	Corporate name is only protected in the province or territory of incorporation.
Federal Name Granting Guidelines are very strict and many proposed names are rejected.	Incorporator's responsibility to ensure that proposed corporate name is available for use. Names are not usually rejected unless they conflict with another confusingly similar name already in use.
Yearly Filings accompanied by Filing Fee	Filings only required for change of information - some provinces have no filing fee
Can operate across the country as of right, subject to provincial extra-provincial filing requirements.	Can only operate within the province of incorporation as of right. Must register extra-provincially if operating in other Provinces.
Government Incorporation Fee - $200.00	Government Incorporation Fee - varies (Ontario - $300.00)

Federal Corporation

An increasing number of entities are choosing federal incorporation as their form of business organization. The enhanced name protection provided to a federal corporation, the increased recognition abroad of a federal charter and the high level of service provided by Corporations Canada staff are reasons frequently cited by corporations and their professional representatives for choosing federal incorporation under the Canada Business Corporations Act.

Frequently asked Questions:

Corporations Canada operates during normal business hours five days a week. They can usually issue your incorporation papers within five business days, when they are delivered to their office by post.. When you file on-line through the Corporations Canada On-line Filing Centre, they can offer same-day or next-day service.

How much does it cost to incorporate?
Filing fees for articles of incorporation under the CBCA are lower when paid on-line than when paid through any other means. Fees are now $200 when submitted on-line and $250 for all other means.

If I incorporate federally, do I have to register or file anything with the provinces or territories?
Yes. Whether you incorporate federally or provincially/territorially, you will likely be required to register your business in any province or territory where you carry on business. Although Industry Canada is working with provincial and territorial officials to decrease this burden, each province and territory right now has individual requirements for registering corporations from outside its borders. You should contact the local corporate law administration office in each province or territory in which you plan to carry on business to determine which obligations may be placed on your corporation.

On-line Filing

Corporations Canada On-line Filing Centre

Further Information

Guide to Federal Incorporation

For more information

You can find out more about federal incorporation in the following contact numbers. These same publications and information kits can also be obtained from Corporations Canada either from their Web site or by calling 1-866-333-5556.

City	Telephone	Toll-free
Alberta	(780) 422-7722	1-800-272-9675
British Columbia	(604) 775-5525	1-800-667-2272
Manitoba	(204) 984-2272	1-800-665-2019
New Brunswick	(506) 444-6140	1-800-668-1010
Newfoundland	(709) 772-6022	1-800-668-1010
Northwest Territories	(867) 873-7958	1-800-661-0599
Nova Scotia	(902) 426-8604	1-800-668-1010
Nunavut	(867) 975-7860	1-877-499-5199
Ontario	(416) 775-3456	1-800-567-2345
Prince Edward Island	(902) 368-0771	1-800-668-1010
Quebec	(514) 496-INFO	1-800-322-INFO
Saskatchewan	(306) 956-2323	1-800-667-4374
Yukon Territory	(867) 633-6257	1-800-661-0543

Provincial Corporation

Corporations are required to register in the provinces in which they do business. The Joint Online Registration System is designed to simplify that process for federal corporations by providing access to the Ontario registration forms online as corporations are filing their federal Articles of Incorporation.

If you would like to register your company within the province, we ask our clients to contact the appropriate Ministry listed below. Most Provincial websites have easy to use on-line registration options which are highly recommend for faster and cost-efficient registration. If you require further information, please contact the below industries for assistance.

British Columbia

Ministry of Finance
Corporate and Personal Property Registries
P.O. Box 9431, Stn PROV GOVT
Victoria BC V8W 9V3
Telephone: (250) 387-7848
Fax: (250) 356-9422
Internet: British Columbia's Ministry of Finance, Corporate Registry

Nova Scotia

Service Nova Scotia and Municipal Relations
Registry of Joint Stock Companies
Maritime Centre, 9th Floor, Box 1529
1505 Barrington Street
Halifax NS B3J 2K4
Telephone: (902) 424-7770
Fax: (902) 424-4633
Internet: Nova Scotia's Registry of Joint Stock Companies

Ontario

Ministry of Consumer and Business Services
Companies and Personal Property Security Branch
393 University Avenue, 2nd Floor
Toronto ON M5G 2M2
Telephone: (416) 314-8880 or 1-800-361-3223
Fax: (416) 314-4852
Internet: Ontario's Ministry of Consumer and Business Services

Prince Edward Island

Consumer, Corporate and Insurance Services
Office of Attorney General
105 Rochford Street, 4th Floor, Shaw Building
P.O. Box 2000
Charlottetown PE C1A 7N8
Telephone: (902) 368-4550
Fax: (902) 368-5283
E-mail: skfurlotte@gov.pe.ca
Internet: Prince Edward Island's Office of Attorney Gene

Quebec

Direction des Entreprises
Le Registraire des entreprises
800, Place d'Youville, 9e étage
Québec QC G1R 4Y5
Téléphone: (418) 643-3625
Fax: (418) 646-9660
Internet: Le Registraire des entreprises - Direction des entreprises

Goods and Services Tax and Harmonized Sales Tax - GST/HST

Most persons and organizations engaged in commercial activities in Canada who have annual worldwide, taxable sales of more than $30 000 must register for and collect the Goods and Services Tax / Harmonized Sales Tax (GST/HST).

All taxi operators must register for GST/HST, regardless of their revenues.

The GST/HST applies to most transactions throughout the production and marketing process. Businesses and organizations required to, or who voluntarily choose to, register for the GST/HST are referred to as registrants. Business must register to obtain a Business Number with a GST/HST account. Registrants can claim a credit to recover the GST/HST that is paid or payable on purchases used to provide taxable goods and services.

Effective July 1, 2006, the rates of the GST and the HST will be reduced. The rate of the GST will be reduced from 7% to 6%. The rate of the HST will be reduced from 15% to 14%.

Telephone registration: 1 800 567-4692 to register a GST/HST

The Business Number (BN)

The BN is a federal numbering system which is assigned to a business (one business, one number) to deal with the Canada Revenue Agency (CRA). The Business Number (BN) is a reference numbering system that replaces the multiple numbers businesses require to deal with the government. The BN is designed to help businesses reduce costs and increase competitiveness; it also increases government efficiency and helps it deliver one-stop service at Business Windows.

How to Apply

On-line

This service allows you to register for a BN or a CRA account via the Internet. You can also register for some provincial programs accounts at the same time. To register, Click Here.

Phone

You can register for a BN and CRA account(s) by calling our Business Enquiries line at 1-800-959-5525. Before calling, be ready to answer all the questions in Part A of Form RC1, Request for a Business Number (BN) , and any other questions in the form that relate to the accounts you want to open.

Mail

You can register for a Business Number (BN) and CRA accounts by completing Form RC1, Request for a Business Number (BN) and mailing or faxing it to your tax services office.

Offices

To find the closest service office near you click on the following link:
http://www.cra-arc.gc.ca/contact/tso-e.html

General Information

• Business account registration (BN)

Online Forms

• RC1 Request for a Business Number (BN)
• RC1A Business (BN) - GST/HST Account Information
• RC1B Business Number (BN) - Payroll Deductions Account
• RC1C Business Number (BN) - Import/Export Account Information