Budding entrepreneurs may be seriously thinking about starting their own small business, but there are many issues that must first be addressed before getting a startup off the ground. One necessary step involves setting up a business plan and model for the business, and in order for this to take place owners need to decide how they want to set up their company.
There are several options for entrepreneurs when it comes to the legal structure of a business. Three of the main entities are sole proprietorship, partnerships and incorporation. Advantages and disadvantages exist for each of these options, and it is important that professionals understand the implications of each before deciding on one for their business.
Sole Proprietorship
Sole proprietorship is the cheapest and easiest way of starting a small business, as there is only one owner of the venture. That entrepreneur is responsible for the legal and tax responsibilities that go along with owning a business, such as tracking all forms of expenses.
Perhaps the biggest concern with sole proprietorship is that the owner's business finances are tied into their personal accounts. Debts may have to be paid out of private funds, and all business profits must be reported as personal income.
Partnerships
A business owned by at least two people is classified as a partnership. Similar to sole proprietorship, this structure only requires a few simple setup procedures before businesses can begin functioning.
Entrepreneurs entering in a partnership should consider drafting a legal agreement laying out the partnership details. This contract can detail how business decisions will be made and who will have what responsibilities, ensuring that informed decisions are made by those with proper education or qualifications.
Incorporation
Entrepreneurs who want to separate the business from their personal lives can choose incorporation, which provides protection against potential problems such as debt related to business expenses. Incorporation can occur on a federal or provincial level and requires more of an upfront investment.
Self-employment is rapidly increasing among many Canadian populations and across all types of startup businesses, with young citizens ages 15 to 24 seeing the fast rate of growth, according to CIBC World Markets. Meanwhile, so called "seniorpreneurs" currently comprise a record 25 percent of all self-employed individuals, proving that it is never too late to take classes and embark on a new career.
Those who want to strengthen their skills and gain knowledge will benefit from the fundamental business courses in Business Administration Management program at Reeves College. For more information on the program, fill out the form on the right.