Starting a Business: Forms of Business Ownership

A Comparison of the Different Forms of Business Ownership in Canada

Choosing the right form of business ownership is important because the form of business ownership you choose will determine how your business is organized, how the money that flows in and out of your business is handled, and how your business is taxed.

Use this comparison of the four types of forms of business ownership to help you choose the best form of business ownership for you when you're starting a small business in Canada.

Form of Business Ownership Choices

There are essentially four forms of business ownership in Canada:

• the sole proprietorship,
• the partnership,
• the corporation
• and the cooperative.

Let's look at the two main advantages and disadvantages of each of these forms of business ownership.

The Sole Proprietorship

• Easiest form to set up.
• Owner solely controls the business.

• Unlimited liability.
• Can be hard to raise capital.

The Partnership

Advantages

• Shared risk.
• Shared management.

• Risk of conflict between partners.
• Shared decision making.

The Corporation

• Limited liability.
• Easier to raise capital.

Disadvantages

• Most expensive form of business to set up.
• Involves a lot of ongoing paperwork.

The Cooperative

Advantages

• Owned and controlled by its members.
• Limited liability.

Disadvantages

• Decision making can be slow.
• Risk of conflict between members.

To learn more about the advantages and disadvantages of each form of business ownership, read Choosing a Form of Business Ownership.

If you are considering forming a partnership, you'll want to read 10 Questions Good Partnership Agreements Need to Answer.

More on Incorporation

If you are thinking of choosing incorporation as your form of business ownership, you'll also want to read:

Should You Incorporate Your Small Business?

How to Incorporate Your Business in Canada

Getting Your New Corporation Up and Running

Forms of Business Ownership and Business Registration

The form of business ownership you choose determines the business registration procedure you need to follow.

All businesses in Canada must register their business names in their respective provinces or territories except for sole proprietorships that use only the owner's legal name with no additions (except in Newfoundland and Labrador) (See Do I Need to Register a Business Name?)

For information on how to register a business name, see Business Registration in Canada.

Back to > Steps to Starting a Business