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The “Small Business Accountants”

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Form of Business

There are three types of business structure: sole proprietorship, partnership, and corporation. 

The type of structure you choose has a significant effect on the way you report your income, the type of returns you complete each year, and many other matters. One of the most important concerns will be your liability for business debts.

a.       Sole proprietorships:

With this type of business organization, you would be fully responsible for all debts and obligations related to your business and all profits would be yours alone to keep. As a sole owner of the business, a creditor can make a claim against your personal or business assets to pay off any debt.

Advantages:

Disadvantages:

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/menu-eng.html

 b.      Partnership:

 A partnership would be a good business structure if you want to carry on a business with a partner and you do not wish to incorporate your business. With a partnership, you would combine your financial resources with your partner into the business. You can establish the terms of your business with your partner and protect yourself in case of a disagreement or dissolution by drawing up a specific business agreement. As a partner, you would share in the profits of your business according to the terms of your agreement.

You may also be interested in a limited liability partnership (LLP) in the business. This means that you would not take part in the control or management of the business, but would be liable for debts to a specified extent only.

When establishing a partnership, you should have a partnership agreement drawn up with the assistance of a lawyer, to ensure that:

Advantages:

Disadvantages:

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/prtnrshp/menu-eng.html

c.       Corporation:

Another business structure is to incorporate your business. This can be done at the federal or provincial level. When you incorporate your business, it is considered to be a legal entity that is separate from the owners and shareholders. As a shareholder of a corporation, you will not be personally liable for the debts, obligations or acts of the corporation.

Advantages:

Disadvantages:

       http://www.cra-arc.gc.ca/tx/bsnss/tpcs/crprtns/menu-eng.html