More and more Canadians are starting side hustles, from dog walking and home baking to offering freelance services. If you’re thinking of turning your skills into income, choosing the right business structure is one of the most important steps to set yourself up for success.
There are a few different types of business structures to choose from, and each type offers different value. Particular business structures are better suited for other goals, from cost to tax implications. We’ll provide a brief overview of choosing the right business structure to suit your needs.
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3 Common Business Structures in Ontario
In Ontario, there are three different types of business structures:
- Sole Proprietorship: Viewed as a small business with one owner, it is inexpensive to start.
- General Partnership: Two or more owners, which is also viewed as a small business and is affordable to begin.
- Corporation: A separate legal entity, offering liability protection and tax flexibility, though often more than what’s needed for starting a side hustle.
Why Many Choose a Sole Proprietorship in Ontario
For starting a side hustle, a sole proprietorship is a good fit for operating the business independently. A few of the advantages of this business structure include:
- Easy to start and cancel
- Business taxes are included in your tax return filing
- Comes with personal liability for the sole owner
If you’re sold on going with this business structure, we at Ontario Business Central can help get you started with registration. The cost for starting a sole proprietorship business in Ontario is approximately:
$66 (our fee) + $60 (government fee) + $16 (OBC handling fee) + 13% HST = $152.66
At OBC, we also offer a few other add-on items during your registration, such as a name search, domain name registration, and payroll registration to help cover all your bases.
It is worth noting that should you consider adding a partner to your business, you would need to cancel your registration and begin the process for a General Partnership.Â
When to Consider a General Partnership
A partnership or general partnership is another option to consider, particularly if you’re starting a side hustle with another person or a small group of people. These are ideal for collaboration to combine differing expertise, such as a freelance web developer working alongside a marketing expert to find business opportunities.
General Partnerships involve shared liabilities, profits, and losses. Keep in mind that you are able to add a new partner or remove one, as long as the business remains a partnership. In addition, you would need to cancel your registration if you wanted to become a Sole Proprietorship.
Is Incorporating in Ontario Worth It for a Side Hustle?
It all depends on your goals. Incorporating your side hustle in Ontario turns it into its own entity, showing the world you’re more than a small business. It also comes with various benefits:
- Name protection within your chosen industry
- Personal liability protection
- Tax advantages (corporations are taxed at a lower rate than individuals)
- Flexibility to change your business as it grows
- Professional image for the business
How to Choose the Right Fit
You’ll want to ask yourself:
- How serious is this side hustle?
- Ideating long-term goals
- Review potential for future expansions
- Are you working alone?
- What is your liability comfort level?Â
- Do you need or want a partner to rely on?
Without getting too into the weeds, know that choosing your business structure is not always an easy decision. Ontario Business Central is here to make it a little easier. We can help you register or incorporate quickly and easily, so there’s no need to navigate it alone.
Your Side Hustle, Your Future
Choosing the right structure sets the stage for your side hustle’s success. Whether you’re going solo or teaming up, Ontario Business Central is here to help make it official, so you can focus on doing what you love.
inquiries@ontariobusinesscentral.ca
Toll-Free: 1-800-280-1913
Local: 1-416-599-9009
Fax: 1-866-294-4363
Office Hours: 9:00am – 5:00pm
Monday – Friday E.S.T.
Ontario Business Central Inc. is not a law firm and cannot provide a legal opinion or advice. This information is to assist you in understanding the requirements of registration within the chosen jurisdiction. It is always recommended, when you have legal or accounting questions that you speak to a qualified professional.
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