The Canadian economy is booming with multiple million-dollar ventures. The country sees a rapidly growing number of small businesses enter the market every year.
Despite the promises and facilitation offered by the Canadian government, starting a business without a skilled corporate lawyer by your side is a risky move. This is because Canadian business laws are complex and vast, therefore making it difficult for new entrepreneurs to fully understand them.
Moreover, a competent business lawyer in Toronto will also help you in choosing the right type of business in Canada that will aptly cater to your business needs. So if you’re about to start a business, we suggest you consult a lawyer on an immediate basis.
Next up, read this blog to learn about various types of businesses in Canada and their pros and cons for choosing the right one for yourself.
Eight Business Structures to Choose From
Knowing the different types of businesses in Canada and choosing the right one can help you with tax benefits, avoid legal issues, and ensure smooth operations. Here are some of the business structures you can choose from.
Sole Proprietorship
A sole proprietorship is the simplest business structure that is owned by an individual. Sole proprietorship businesses are easy to set up, have the least complex taxation, and are widely popular. Individual owners, also known as sole proprietors, are taxed on their business and personal income combined.
Partnership
Another popular type of business in Canada is a partnership. A partnership can be formed between two or more partners and is a great way for entrepreneurs looking for extensive resources. Partnership owners are jointly taxed and are liable for business debts and decisions of others.
Limited Liability Partnership
Limited Liability Partnerships are slightly different from simple partnerships. In a limited liability partnership, a partner is only liable as per their investment in the venture. This means that one partner with majority shares will have a great liability and control over the business.
Corporation
A corporation is presumably one of the most complex sets of business structures out there. A business lawyer will help you set up a corporation that will be entirely a different entity from the owners. A corporation can have single or multiple owners who are not liable for the debts and default of the corporation.
Limited Liability Corporation
A limited liability corporation further limits the liability of each partner in the ownership on the back of their investment in the venture. An LLC is one of the most complex types of business in Canada but has its own unique benefits.
Public Corporation
A public corporation is registered in the Canadian stock markets and is open to the public for ownership. Individuals who purchase shares in a public corporation can become stakeholders of the business and also gain authority for business decisions.
Private Corporation
A private corporation is owned by the public, but instead of the business, the corporation that owns the business has its share given to the public. If you seek to set up a private corporation, consult a top lawyer in Toronto to help you with its legalities.
Canadian Control Private Corporation
Canadian Control Private Corporations (CCPC) are lucrative for numerous business owners owing to the tax benefits of this type of business. CCPCs are owned by Canadian nationals, cannot have access to foreign stock markets, and must have only Canadian stakeholders. Due to the unique nature of CCPCs, these businesses are accorded special exemptions by Canadian Revenue Agency (CRA).
Pros and Cons of Different Business Structures
Without knowing the pros and cons of different types of businesses in Canada, you cannot pick one. So here are the benefits and downsides of each type.
Sole Proprietorship
Sole proprietorship is the simplest type of business structure in Canada. Anyone can register as a sole proprietor and use their personal tax number to file business taxes. However, the downside of a sole proprietorship is that the owner will be personally liable for the business’s debt. In case the business defaults, the lenders can acquire the personal assets of the owner to recover the debt.
Partnership
A partnership has numerous benefits, including access to more funds, more resources, and a better work-life balance due to sharing of the load. However, the risk of conflicts is higher in partnerships, and some entrepreneurs may feel a lack of control and less autonomy.
Limited Liability
Limited Liability Corporations are best for individuals looking to reduce their personal and financial liabilities. LLC structures allow business owners to separate their personal finances from that of their business and enjoy a higher peace of mind.
Canadian Control Private Corporation
Canadian Control Private Corporation (CCPC)Â has numerous benefits that make it a viable option for Canadian businesses. The tax benefits and exemptions offered to CCPC are unmatched by other corporations. However, the restriction regarding ownership of foreigners in the CCPC type of business sometimes makes it difficult for enterprises.
How to Choose the Right Type of Business in Canada
If you want to enjoy tax benefits, avoid civil litigation issues, and make sure that the operations of your enterprise run smoothly, here is the way to choose the right type of business in Canada.
- Take Your Dynamics into Account: To choose a business type, consider your investment, the number of partners, and the jurisdiction where you’ll be operating.
- Consider the Risks: There are downsides to each business structure. Make sure to consult a business lawyerbefore making a pick.
- Think of Resources and Capital: If you have difficulty raising capital and need access to more resources, a corporation or a partnership may work better for you.
- Tax Benefits: CCPC has the most tax benefits. However, some enterprises also prefer LLCs and corporations due to tax benefits and lower liabilities.
Hire a Corporate Lawyer to Setup A Business in Canada
If you’re looking to start a business and need to learn more about types of businesses in Canada, then connect with Nanda and Associate Lawyers. The Toronto-based law firm, in addition to its skilled corporate lawyers, also offers consultation for spousal immigration, refugee claims, intracompany visa transfers, and Canadian immigration services.
Book a consultation now to discuss your legal matters.
