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RISING WOMEN EXPERT
ADVICE...
I am considering
establishing a small business. How should I structure my new venture?
There are a number of ways to structure a business. The “sole
proprietorship” is the least complex structure. You, as the sole proprietor,
carry on business in your own personal capacity, which means accepting all
risks and liabilities associated with running the business. In other words,
the sole proprietor has unlimited liability. Any business obligations are
also your personal obligations. Despite this unlimited liability, many
businesses are operated as sole proprietorships. It is certainly less costly
to operate, and you avoid the expense of incorporating and maintaining a
company. Some owners wait until their business has grown in size before
considering incorporating. It is important to note that if you are engaged
in a business for trading, manufacturing, contracting or mining purposes,
and you are not associated in a partnership, you must be cautious in naming
your business. Should you use a name or designation other than your own
personal name, or some wording indicating a number of persons involved such
as “and Company”, you must file a declaration of trade name within six
months of using the business name.
Another common way to structure a business is to “incorporate”. One of the
advantages of incorporating is the protection offered to shareholders
regarding personal liability. Generally speaking, shareholders of a company
are not liable, as shareholders, for any liability or default of the
corporation. There are exceptions however, and a lawyer can review those in
detail with you. There is not only a fee associated with incorporating, but
there are also a number of registration requirements, including the
company’s name, the classes and number of shares that will be issued, the
number of directors, and the by-laws. In the event you have chosen a name
for your company, as opposed to incorporating a numbered company, you must
conduct a NUANS search, which reserves the proposed corporate name. Once the
company has been incorporated, you are required to maintain the annual
returns, financial statements and corporate tax returns. Incorporation is
generally preferred if there are a large number of investors in your
business.
There are numerous other ways of structuring your business, such as
“partnerships”, ”joint ventures”, and “not-for-profit”. A lawyer can assist
you in determining which is the most appropriate course for you.
Need expert advice on structuring your business? Contact Janice Papp
of Masuch Albert LLP at 403.543.1119 |
