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Business Setup

We all start out with a great idea and want to sell it to the world but before we can do that we have to have the correct business structure to support our business.

Ask yourself the following questions..

  1. Where am I going to sell my product?

  2. Do I have to warehouse product or is it a digital product?

  3. Where is my business located? At home or in a business space.

  4. Do I have a business partner or people wanting to invest?

  5. Do I need a personal bank account or business account?

A suitable business structure will help protect you from taxes and liabilities and any litigation that may arise.

Canada and the USA have different names structures and we will go through some of them in this brief post.  We will expand in subsequent posts.

In Canada we have the following structures
– Sole Proprietor
– Partnership (LLP)
– Non-Profit Organization
– Corporation (Ltd., Corp)
– Cooperative

In Canada, similar to the United States, there are several common business structures that a new business should consider when setting up. The choice of structure depends on factors such as the nature of the business, the number of owners, liability considerations, and tax implications. Here are the most common business structures in Canada:

  1. Sole Proprietorship: Just like in the US, a sole proprietorship is the simplest form of business structure in Canada. It is owned and operated by a single individual, who is personally responsible for all liabilities of the business. There is no legal distinction between the owner and the business.

  2. Partnership: A partnership is a business structure where two or more individuals share ownership and responsibility for the business. There are two main types of partnerships: general partnerships and limited partnerships. In a general partnership, all partners have unlimited liability, while in a limited partnership, there are general partners with unlimited liability and limited partners with limited liability.

  3. Corporation: A corporation is a separate legal entity from its owners. It is owned by shareholders and managed by directors and officers. Corporations provide limited liability protection to their shareholders, meaning the owners are not personally responsible for the debts or liabilities of the corporation. There are different types of corporations in Canada, including federal and provincial corporations, and they have specific requirements for incorporation and ongoing compliance.

  4. Cooperative: A cooperative is a business structure that is owned and operated by its members, who can be customers, employees, or other stakeholders. The primary goal of a cooperative is to serve the common needs and interests of its members. Cooperatives can be incorporated at the federal or provincial level and must adhere to specific cooperative legislation.

  5. Nonprofit Organization: Just like in the US, nonprofit organizations in Canada are formed for purposes other than making a profit. They are generally organized to serve charitable, educational, religious, or scientific purposes. Nonprofits in Canada have tax-exempt status and must comply with specific regulations to maintain their nonprofit status.

In the USA there are the following structures
– Sole Proprietorship
– Partnership
– Limited Liability Company
– Non-Profit Organization
– Corporation

Here is a bit of an explanation of each of the above for the USA.

In the United States, there are several common business structures that a new business should consider when setting up. The choice of structure depends on various factors such as the nature of the business, the number of owners, liability considerations, and tax implications. Here are the most common business structures in the USA:

  1. Sole Proprietorship: This is the simplest and most common form of business structure. In a sole proprietorship, the business is owned and operated by a single individual. The owner is personally responsible for all liabilities of the business, and there is no legal distinction between the owner and the business.

  2. Partnership: A partnership is a business structure where two or more individuals share ownership and responsibility for the business. There are two main types of partnerships: general partnerships and limited partnerships. In a general partnership, all partners have unlimited liability, while in a limited partnership, there are general partners with unlimited liability and limited partners with limited liability.

  3. Limited Liability Company (LLC): An LLC is a flexible business structure that combines elements of a partnership and a corporation. It provides limited liability protection to its owners, known as members, while allowing for pass-through taxation. This means that the LLC itself is not taxed, but the profits and losses pass through to the members’ personal tax returns.

  4. Corporation: A corporation is a separate legal entity that is owned by shareholders. It provides limited liability protection to its owners, who are not personally responsible for the company’s debts or liabilities. Corporations have more complex legal and tax requirements compared to other business structures. There are two main types of corporations: C corporations and S corporations, which have different tax treatments.

  5. Nonprofit Organization: A nonprofit organization is formed for purposes other than making a profit. Nonprofits are generally organized to serve charitable, educational, religious, or scientific purposes. They have tax-exempt status and must comply with specific regulations to maintain their nonprofit status.

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