Entrepreneurship & Small Business

Sole Proprietorship VS Incorporation

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  • Aug 9th, 2006 5:09 pm
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[OP]
Newbie
Jul 19, 2006
34 posts
Hwy 7 & Hwy 48

Sole Proprietorship VS Incorporation

Can someone explain to me the differences or better yet the advantages and disadvantes for these two types of companies?


Thanks

Matt
20 replies
Deal Addict
Mar 15, 2003
1407 posts
17 upvotes
Generally it's for liability purposes. If somebody tries to attach themselves to the assets of the company (say they sue the company successfully) they can't generally take your house too. If you're not incorporated, then they're coming after you and your personal assets.

personally I think you can incorporate for like $300-$500 so I suggest doing it if only to look professional. That being said, for a lot of small operations registering your business name as a seperate entity and running it seperately from your personal stuff - but not actually incorporated - is perfectly fine. My first business I ran for 2 years like that and never had a problem.

My limited understanding (as per my accountants/lawyers) is that there aren't much in the way of financial advantages for incorporating unless you've got a pretty good sized company. So that's not a reason to do it.
[OP]
Newbie
Jul 19, 2006
34 posts
Hwy 7 & Hwy 48
Thanks Wheel.

So incorporated protects you in case of customers who sue. Hrmm. I guess the chance for someone to sue you would increase if you were running a business that offered a service. Say if i was running a retail business. The chance for someone to want to sue me would be high unlikely right since i am just providing products to end users.

Is this fee of 200-500 for the year, or a one time payment for the length that you have the business?

Matt
Deal Fanatic
Jul 4, 2004
7022 posts
486 upvotes
Toronto
I suggest you do some serious research. This is a very basic question...if you're goign to start a business, you need to do an awful lot of research..............and that usually isn't asking on RFD where any Joe can post advice, true or false.
[OP]
Newbie
Jul 19, 2006
34 posts
Hwy 7 & Hwy 48
Posting a question on here is a step in researching this topic. I do not take every word as gospel. I collect information from many sources and form my own opinion.

Matt
Deal Fanatic
Jul 4, 2004
7022 posts
486 upvotes
Toronto
champtechdev wrote:Posting a question on here is a step in researching this topic. I do not take every word as gospel. I collect information from many sources and form my own opinion.

Matt
Your question was so open ended, and yet the answer will depend on YOUR specific business. Any basic economics or accounting textbook even can explain the fundamental points to you.

Again, the end result depends on YOUR particular business. If you want to do it right and don't trust your own research ability, consult a professional accountant.
Deal Addict
Mar 15, 2003
1407 posts
17 upvotes
champtechdev wrote:Thanks Wheel.

So incorporated protects you in case of customers who sue. Hrmm. I guess the chance for someone to sue you would increase if you were running a business that offered a service. Say if i was running a retail business. The chance for someone to want to sue me would be high unlikely right since i am just providing products to end users.

Is this fee of 200-500 for the year, or a one time payment for the length that you have the business?

Matt
Not if I slip and fall on your wet floor.

Drew is correct, for exact advice, set up an appointment with an accountant. It's a financial decision, so drop $100 on some professional advice.

The $500 I mentioned is a one time fee, you've got to pay to register to the gov't and some fees to the registration company, that type of thing.

I have a variety of business interests. I generally incorporate based on gut feel myself, so fwiw.
[OP]
Newbie
Jul 19, 2006
34 posts
Hwy 7 & Hwy 48
Thank you people. I will be cautious before posting here in the future.

Matt
Deal Addict
Apr 2, 2003
1358 posts
13 upvotes
Richmond Hill
Don't be cautious about posting...think carefully about what you are asking and whether your question is just due to laziness or genuine ignorance. If it's deemed to be due to laziness, well no one likes that do they?
Deal Fanatic
User avatar
Apr 6, 2003
8454 posts
9 upvotes
The official gov pages have some great info on this.
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Deal Addict
Feb 24, 2004
1438 posts
76 upvotes
champtechdev wrote:Can someone explain to me the differences or better yet the advantages and disadvantes for these two types of companies?
This thread is similar to your question:

http://www.redflagdeals.com/forums/show ... ncorporate

Most people misunderstand the limited liability benefit. If you're the sole owner and director of the company, you CAN be sued for personal assets. Take a look at any Management Proxy Circular for any public Canadian company and you'll see that they paid liability insurance for the Directors.

Read up on the documentation from the Ministry:
http://www.mgs.gov.on.ca/
Deal Addict
Feb 24, 2004
1438 posts
76 upvotes
wheel wrote:Not if I slip and fall on your wet floor.
Buy business insurance for that.. Don't need to incorporate if that's your only concern.
Newbie
Mar 28, 2005
12 posts
2 upvotes
Langley
In the past people used Incorporations to protect their personal assets from business liabilities.... However today that corporate vail can be broken as directors of the incorporated company can be held liable if it can be shown they took delibirate actions to do bad.
Deal Addict
User avatar
Jul 4, 2006
2535 posts
241 upvotes
i think some important factors you should ensure you get professional advice on is:

possible pros
  1. Tax rate (46.14% personal, 36% business, 18.62% small business)
  2. QSBC Share Status
  3. Estate planning (if it's applicable to your needs)
  4. Enhanced tax deferral through bonuses
cons
  1. payroll taxes
  2. losses of corporation can't offset your other income
my list certainly isn't exhuastive.. it's just a reminder of some other things that haven't been posted here yet.
Deal Addict
Mar 15, 2003
1407 posts
17 upvotes
fly wrote:Buy business insurance for that.. Don't need to incorporate if that's your only concern.
Um, yeah. Good point. So why does anyone incorporate anymore? I'm stumped :) .

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