Whether you have decided to establish a service-based business in the high-tech industry or a general store in your neighbourhood, the form of business ownership you choose will impact your rights and responsibilities, including personal liability, registration requirements, and licensing arrangements. The three most common forms of business ownership in Canada are sole proprietorships, partnerships and corporations.

A graduate of the globally top-ranked Schulich School of Business, Sean Langan can help you assess your commercial objectives and determine which form of business ownership is best for you. Our services include:

• Incorporating your business under Federal or Ontario laws
• Closing business and franchise purchases
• Preparing the articles of incorporation and minute book
• Performing a NUANS business name search
• Preparing, filing and prosecuting trade-mark applications for your business name in Canada, the United States, and throughout the world
• Instituting debt collection proceedings to recover overdue accounts

A sole proprietorship is a business owned and operated by a single individual. The individual may employ others in the business but cannot employ himself or herself. Establishing and administering a sole-proprietorship is a comparatively easy and inexpensive method of carrying on business. All benefits flowing from the business accrue to the sole proprietor, and are included on his or her personal income tax form. Conversely, all obligations associated with the business are also the responsibility of the sole proprietor. This includes debt and contractual obligations, and liabilities arising from tortious acts of the sole proprietor or the employees of the sole proprietor.

A partnership is a legal relationship between two or more persons carrying on business with a view to profit. Like a sole proprietorship, the members of a partnership carry on the business directly. The Partnership Act recognizes two types of partnerships in Ontario, namely a general partnership and a limited partnership. In a general partnership, each partner (i.e. a member of the partnership) is jointly and severally liable for the debts of the partnership. This means that a single partner within the partnership can be held responsible for the debts incurred in the name of the business by another partner. Furthermore, a single partner may also be held responsible for any error or omission by the other partner committed in the ordinary course of business.

A limited partnership may carry on any business that a general partnership may carry on. However, in a limited partnership the liability of one or more partners (limited partners) is limited to the amount that partner or those partners invested in the partnership business. The liability of the remaining partners (general partners) is unlimited. The limited partners may share in the profits of the limited partnership proportionately to their contributions to the partnership, unless there is a partnership agreement that gives priority to one or more of the partners as to profits. To remain a limited partner, the partner must not take part in the management of the firm, act on behalf of the business, or become a general partner.

The key advantage of a partnership is the synergy that develops in the working relationship between the partners. Partnerships flourish where the partners have complementary talents, and are comfortable sharing the decision making and firm management tasks. Partnerships are also advantageous from a tax perspective. Partnerships do not have to file a separate income tax return, since the income or loss from the partnership are allocated to and combined with personal income of the each of the partners.

The main disadvantage of partnership is the personal liability exposure of each of the partners, except limited partners in a limited partnership business.

A corporation is a legal entity separate in law from the shareholders of the corporation. Unlike in a sole proprietorship or partnership, in which the owners own the business directly, the shareholders own the corporation through their ownership of shares. In order to obtain shares in the corporation, the shareholders may provide money, property or services, which then belong to the corporation. The separate legal status enables a corporation to own property, carry on business, incur liabilities and possess rights. In contrast, a sole proprietor and partners are the owner or co-owners, respectively, of the assets used in their business.

The key advantage of incorporating is the limited liability of the corporation. A shareholder's liability to the creditors of the corporation is limited to the total amount of his or her investment. Conversely, a sole proprietor and partners are liable to the full extent of their personal assets for any liabilities of their business. In addition to the limited liability of the incorporated business, corporations are also advantageous for tax deferral and income splitting purposes. For income tax purposes, the income of the corporation is determined and subject to tax separately from that of its shareholders. The after-tax income of the corporation may then be paid to its shareholders in the form of a dividend. The shareholders can determine when to receive the dividend income from the corporation so as to defer their tax obligations to a later date, such as when their personal incomes are subject to lower tax rates.

The opportunity to split income is another key advantage of incorporating a business. Since a shareholder does not have to be actively involved in the corporation's business activities to receive a dividend, a spouse and/or children may be shareholders in the corporation. This will enable the business owner to to redistribute or "split" the after-tax income of the corporation from a family member in a higher tax bracket to family members in a lower tax bracket.

The main disadvantage of incorporating a business is the additional expense of administering the corporation. Each year the corporation must file annual income tax returns and other corporate documents with the Canada Customs and Revenue Agency and the provincial Ministry of Finance.