Sole Proprietorship: Getting it Right
All have unique advantages and disadvantages and often circumstances will determine which one suits a specific individual’s particulars. But whatever you choose, an informed decision is the best decision.
For many people, sole proprietorship is a good fit:
- Registration is relatively simple. It’s inexpensive to open a business account, research your proposed business name and obtain an HST number.
- Business operations are less foreboding than the other models.
- The business can be a natural outgrowth of a hobby or skill set.
- Owners pay only one set of taxes.
- Owners retain the full profit that their company earns.
How Professional Advice Benefits You
Begin your venture by filling out a registration form and paying the small fee of approximately $60.00. But you should also upgrade your knowledge, not just in your skill set, but in small business practices, financing and legal requirements. Obtaining professional advice can help you to avoid mistakes or omissions along the way.
Some things to consider are:
Research for any regulations that might affect your business operations. For example the Ontario government’s website says, if “you plan to – or currently – operate a business in Ontario, you could be affected by certain government regulations.” It then lists recent, current and proposed regulations.
Consider laws that can affect your business. For example, the Ontario Disability Act of 2005, updated as of Jan 2014, is a law with which you must comply; you need to know whether it will affect your company and to what extent. The government provides excellent information on its website, www.mcss.gov.on.ca/en/mcss/programs/accessibility; if you discover that this can affect your company, then you should plan for compliance.
At some point, you might consider hiring additional help. This introduces such considerations as source deductions, payroll and registering with the WSIB, even for a family member. You will become responsible for the fees as well as various work-site related obligations. Ignorance of the WSIB or any government policy is not bliss; it’s much better to know both your rights and responsibilities as an employer.
Take the Opportunity when Governments are Pro-Business
Sometimes the news from the government can be beneficial: In 2011, the Federal government introduced a number of initiatives including:
- Reducing the small business tax rate from 12 per cent to 11 per cent.
- Raising the amount of business income eligible for that rate from $300,000 to $500,000
- Reducing the burden of federal regulatory requirements on Canadian enterprises. (Department of Finance Canada).
Legal advice: Plan for Success and Protect Yourself
While you plan for success, you must also protect yourself from business failure, bankruptcy and personal liability. Should there be any loss or lawsuit, you are liable. In a sole proprietorship, your personal assets, including your home and bank account are vulnerable. You must obtain solid legal advice and ensure that you have a knowledgeable insurance agent who will arrange for protective coverage.
Being self-employed can be an extremely rewarding and profitable experience, but you need to make smart decisions and avoid the pitfalls. To help you make the choice which best fits you and your circumstances, and to navigate the complexities of laws and regulations even for sole proprietorship, Howard Nightingale Professional Corporation has accumulated a wealth of experience in the commercial and corporate law sector.
Please contact us or call 416 663-4423 or toll free at 1-877-224-8225. For additional information please visit our blog series on “The Yin and Yang of Choosing the Right Type of Business Ownership”