It’s simple and affordable
Whether you want to start a food kiosk, a one-person repair shop, or a freelance writing business, a sole proprietorship is a pretty flexible choice for your corporate form. With less paperwork to file, you only need to keep simple documentation for this business setup.
Operating freedom and flexibility
As long as your business remains small, a sole proprietorship is the most flexible business form to change. You can make any change you want, including changing business policies and type of business, without much cost or process. Sole proprietorships also offer a higher degree of control and fast decision-making opportunities. Unlike in partnerships or corporations, you don’t need consent or approval from partners or officers to make any business decision.
Straight forward banking
Registering as a sole proprietor means that your banking processes become simplified. As a sole proprietor, you can make and accept business payments straight from your bank account, plus you don’t have to go through the process of finding a business chequing account.
Simplified Tax Reporting
A sole proprietorship has a very simple tax reporting process. You don’t have to worry about filing any separate taxes for businesses. Sole proprietors have to fill out Form T2125 that includes reporting professional income as well as your expenses.
Requirements for Sole Proprietorships in Alberta
Regulations for registering your sole proprietorship business vary by jurisdiction, and taxes can vary from region to region. Check with your provincial and territorial government where you plan to run your business to learn about your legal obligations.
If you choose to form a sole proprietorship while using your own name, you don’t need to register the business in Alberta. You will need to seek approval from the provincial Corporate Registry in Alberta if you operate a business under any other name. As a small business owner in Alberta, some of the taxes you pay to the Canada Revenue Agency (CRA) include excise taxes on fuel-inefficient vehicles, certain petroleum products, and automobile air conditioners, as well as excise duties on alcohol and tobacco products.
When Should I Consider Incorporating My Business?
Incorporation means changing the format of your small business into a registered corporation. This carries many of the same advantages as a limited liability corporation does in the United States, though the LLC form doesn’t exist under Canadian law. The most notable advantage of incorporation is that it protects your personal assets in case some one your company owes claims legal judgment against you.
Unlike in a sole proprietorship where the business dies with the owner, your company continues to exist even when the management changes. Simply put, a corporation is a separate legal entity and is considered a person on its own. The company can file, sue, or be sued, just like real people.
Adding a legal ending, such as Inc., to your business name also brings authority and instant legitimacy. An incorporated business can collect payments, and more easily access loans and capital from different sources. Brand building and marketing can also be easier for corporations because they sell themselves to the masses.
The Bottom Line on Sole Proprietorship
If you want to increase profit margins, share losses, more easily access capital, and have financial control over a business that can have perpetual existence, then set up a corporation. As with a sole proprietorship, the steps to incorporate a business vary from region to region. Consult with the CRA and territorial authorities about the rules and regulations of incorporating your business.