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Pros and cons of sole proprietorship in Canada

16 January 2021, 10:00 am by Samantha Garner

A sole proprietorship is the oldest, simplest and most common form of organization for a company.

It’s a business owned by one person — the sole proprietor — and is unincorporated. Easy as that!

Quick facts about sole proprietorship in Canada

As the business owner, you own all assets, earnings, and profits. However, you also hold all the responsibilities (including legal and debt), obligations and liabilities.
If you establish a business in your own name, without adding any other words, you don’t have to register the business. You can either bill customers in your name, or register a business name and bill customers under that name, which must have a separate bank account. The law doesn’t distinguish between the business and its owner, and personal income tax must be paid on all revenue generated by your business.
If your revenues are more than $30,000, or if you have legal ownership of more than one business, you must register for GST/HST (one registration will cover all businesses).

Let’s take a look at some of the pros and cons of this type of ownership.

Pros of sole proprietorship

Least expensive form of ownership, low start-up costs.
Most freedom from regulation.
Simple to start and dissolve.
Complete control over the company and decisions.
Least working capital required.
Complete control over the income generated by the business.
Complete access to profits.
Easier to offset losses against other income.
Flexibility.
Easiest to exit.

Cons of sole proprietorship

Business owner is legally responsible for all debts.
Unlimited liability (not separate by law; can be personally liable for all debts even if it means paying debts with your personal assets).
Business can’t continue in absence of owner.
Harder to raise funds from personal savings or loans.
Higher personal tax rate.
Often harder to find high quality employees.
Limited resources and opportunities for growth.
Some employee benefits are not deductible from business income.

Want to learn more about sole proprietorship? Check out GoForth’s online streaming small business training!

The post Pros and cons of sole proprietorship in Canada first appeared on GoForth Institute | Canadian Entrepreneur Training. Visit the GoForth Blog