WHAT IS THE BEST STRUCTURE FOR MY BUSINESS?

Starting and growing a business can be very stressful and time consuming, but the overall experience should be very rewarding. You can give your business the best start possible by choosing the most appropriate business structure for your business. What structure is best for you can be a complex question based upon several factors including tax consequences, liability and personal circumstances. Even if your business has been operational for some time, the structure may need to be altered due to changed circumstances. Some basic information about some common business structures is included below. At Avery Law Office, we will discuss the advantages and disadvantages of the various structures, help you determine the most appropriate structure and set up your business.

SOLE PROPRIETORSHIP

In a sole proprietorship, you are the sole owner. Sole proprietorships do not have a separate legal identity and can only operate through its owner. As the owner, you are completely responsible for all debts and obligations related to your business; however, you also get to keep all the profits the business makes. Because you are personally liable for the business, a creditor can make a claim against your personal assets, as well as any assets used to operate the business, to satisfy any debts. A sole proprietorship is the easiest business structure to maintain.

PARTNERSHIP

A partnership is a non-incorporated business created between two or more persons. In a partnership, your financial resources are combined with those of your business partner’s and used to operate the business. You and your partner share in the profits of the business based on how much of the partnership each of you own. Each partner is jointly liable for the debts of the partnership. This means that a creditor can go after one of the partners for all amounts that are due to the creditor. The creditor does not have to make a claim against both partners. When establishing a partnership, you should have a partnership agreement in place. This is important because it establishes the terms of your partnership. Without a partnership agreement, the provisions of the Partnership Act (British Columbia) will apply to the partners and the partnership. A lawyer should be consulted to help you prepare a partnership agreement so as to make sure your interests are protected.

CORPORATION

Corporations are the most popular business structure. A corporation has a separate legal identity, separate from its shareholders who are the owners of the corporation. Typically, as a shareholder of a corporation, you are not personally liable for the debts, obligations or actions of the corporation; however, there are ways in which a shareholder can become liable. Incorporating corporations is a complex task. It is recommended that you speak with a lawyer to fully understand how a corporation operates.