Sole Proprietorship vs An Incorporation
Posted On: 24/06/21 - 0

Deciding to start a sole proprietorship vs an incorporation is a tough decision to make. There are a lot of factors you have to consider. If you are looking to opt for incorporating, you should work with an accountant. To make this decision a bit easier, we have broken down a few essential factors to keep in mind while making this important decision.

What is a Sole Proprietorship?

Firstly, in simple words, it means that you run your business yourself. There is no staff involved. Some small businesses start as a sole proprietorship. Once the company grows and becomes profitable, you may re-think incorporating.

What is a Corporation?

Secondly, in a corporation the business is a separate entity from you, the business owner. There could be multiple business owners in this business structure.

Legal Points To Consider In Sole Proprietorships Versus Corporations

Sole Proprietorships do not need to be registered legally. As long as you work under your name. A sole proprietor has control over all business decisions. There is a legal process to starting a corporation. As a sole proprietor you are responsible for all of the debt and risk of the company. In a corporation you are protected legally against debt and risk as an individual that works for that same company. You are an employee of your corporation.

Cost Factors To Consider

Sole props are less expensive to run because you are the only employee and there are fewer expenses than a corporation. Is is also cheaper to file a tax return as a sole proprietor. Corporations are more expensive to run. This is due to multiple staff members, higher overhead costs, rental of commercial space, etc. Plus, it costs more to file a corporate tax return.

There are many things to consider when starting a business, especially how you are going to structure the company. Talk to an experienced advisor who knows the benefits and challenges of running either a sole proprietorship vs an incorporation. Call Cheryl today at 780-482-7297.

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