A Sole Proprietorship is under the classification of setting up a business known as Master Business Licences. The Sole Proprietorship specifically is designed for the single business owner. This establishes a small business with 1 individual as the business owner and operator.
Details about registering a Sole Proprietorship
- Owned by 1 individual
- Registration exists for 5 years and is renewable
- Taxation for the business is included in individuals’ tax return filing
- Easy to establish and cancel
- Inexpensive to start
Things to consider when completing a Sole Proprietorship
- No name protection for the name of the business
- Personal liability where if there is personal or property damage due to the activities of the business, the individual Sole Proprietorship may be held responsible
- Taxation – depending on earned income from the business revenues filing under the individuals’ personal tax return may be higher than if the business was incorporated
- Inflexible – the Sole Proprietorships are limited to changes where the only changes available are address changes of business or individual and business activity.
- Limited access to credit
- Viewed as a small organization by other businesses and suppliers
- Restrictions on wording of Sole Proprietorship to ensure the registration is not viewed as more than one person. Words which are not permitted include group, associates, consultants and any wording where it may be confusing to the business being owned by one single person
- Another business cannot operate under a Sole Proprietorship.
Why do individuals register Sole Proprietorships?
A Sole Proprietorship is a useful tool to start a business whether the business is a grass roots organization, a part time business or a way to see how the world views your business idea with little cost to establish the business.
The main things to keep in mind when registering a Sole Proprietorship are:
- How important is name protection to the business?
If you are spending what you consider to be a fair amount of money for promotional material, advertising, social media whereas the business name is going to be viewed by a larger segment of the population, name protection for the business may be an important aspect of protecting the brand you want to establish with your business. If you are spending money to promote the business and are concerned about protecting the name or brand of the business, incorporating the business where name protection is available may suite your needs.
- How important is liability protection?
When registering a Sole Proprietorship, the business is not a separate entity from you as it is when you incorporate a business. If the business you are operating is, in your mind at higher risk for personal or property damage from the activities associated with the business, it may be a good idea to view incorporation as an alternative where the business is a separate entity from yourself as an individual. You may also want to speak with your insurance broker or insurance company regarding obtaining business insurance in the event of risk.
- What about taxation?
A Sole Proprietorship taxation is filed under the personal taxes of the individual who operates that business. If the revenues associated with the business are or will be higher than the needs of the individual owner, it may be an option to look at incorporation or at minimum a conversation with an accountant or tax expert to advise you on what would work best for you in your specific circumstance.
If after consider, you would like to proceed to register a Sole Proprietorship in the Province of Ontario, here is the link to do so:
If you wish to view an Ontario incorporation as an alternative to registering a Sole Proprietorship, here is the link to do so:
The information Ontario Business Central provides is solely to be used as an informative guide. We do not offer legal or accounting advice.
You may wish to obtain either legal or accounting advice prior to proceeding with the Sole Proprietorship Registration.
Laura Harvey is an entrepreneur herself as the owner of Ontario Business Central Inc. Her passion has always been about supporting the entrepreneurial spirit and advancement within Canada.
Laura authors in-depth blogs for Ontario Business Central assisting entrepreneurs and business owners to start, manage and grow their businesses. She has almost 30 years of expertise as a corporate specialist and 25 years of being an entrepreneur. Laura has the unique position of supporting a community that she also belongs to. She walks the walk right along with you.
You can find Laura on Linkedin and Twitter.