Thread: Sole Proprietorship Vs. Corporation

The past little while I've been thinking and researching the two for my upcoming businesses'. The way I see it, for the first few years which also tend to be the most risky I'll be living at home, probably only driving the Supra as a non work vehicle with a new '12 Dodge Ram for a work truck. I do not want the Supra to be liable for the company. However if I fail then I don't deserve the truck. Read below as to why. Now I'm not sure if that would include my mom's house because I will be claiming a certain percentage of the house for office work on my annual taxes.

Now, upside to incorporating is adding another business; which I plan on doing within a year of opening the first business. Reason being it is an expansion of the first business. Then, if business continues more and more will be added to that all in the automotive field.

This is the way I see it from what I've learned in class/internet:

+Sole Proprietorship:
Very Easy and fairly cheap to register (iirc Ontario is $250 for registration, but renew every 5 years)
Taxes are easy enough for me to do
Easy to eliminate the business

-Sole Proprietorship:
Personally Liable
Costs additional $250 for another company
Not as much interest from investors or professional working staff
Minimal tax flexibility
Fairly hard to raise money for expansion

+Incorporation
Easy to register other companies
Appealing to investors and professionals
Little bit more appealing to potential customers
Partnership options are available in 3 different styles in Canada

-Incorporation
More money upfront when I want to be investing in the initial product
Need to be very careful and make precise decisions (this will be the first time I'm running a business)
May or May not work on the same "T1" taxation form depending on level of partnership
Need a partner you can 100% trust, which right now aside from my Mom I don't have anyone.

If anyone is incorporated on L4P, or has any insight,experience, ideas or tips please share. I'd like the first business to be registered mid-February, then expand probably this spring, or a year from now depending on if I upgrade my business course for another year.

Thanks in advance Luxury4Play
Evan Kohal

Unfortunatley you guys don't have things like LLC's in Canada. Given that you want to start an automotive related business I would say that you should take it safe and go for the corporation.

Just took a look into the costs which were very far off what I thought they originally were. Apparently $65 for Sole Proprietorship and $300 for Corp. I thought it was $250 for Sole Proprietorship and $1k for Corp. I'll be talking to some tax specialists to see what they have to say I'd rather talk to them for facts than rely on a site for somebodies opinion. Fairly sure the Corp is taking the cake here.

For what its worth, I just opened up two companies, and was instructed to open a sole prop. by my accountant. Its all really dependant on the complexity of your tax filings. I have just 1 "customer" in my business so he said its better to do a sole prop. as it allows for easier tax filing, less paperwork, and its cheaper to start up. The amount of paper work that needs to be submitted for a corp. gets pretty complicated.

Thanks Kasimmmmm,

I think for this business I'll end up running sole proprietorship after all. I did talk to a few local business owners that said to incorporate right away today. But after looking into the steps involved in transferring business assets I will go sole proprietorship for my first business as the company has no assets worth mentioning, all online business. I will then incorporate and easily switch the first business into the corp.

Thanks for your input again.

IMHO, corporation is better from the liability standpoint. Also, go ahead, since you are planning on incorporating anyways.

Very good point David, ahh this Sole P Vs. Incorp fence sucks to be sitting on. Decisions Decisions... it does make sense to just get it over with.

they both have their pros and cons...

another thing to keep in mind is that if you need a great part (or all) of the money you are making because you are planning on buying a house or something expensive. Then you may as well not incorporate because the tax savings won't help much if you end up taking most of the money out of the company anyways

I'm thinking with this one a majority of it will be invested back into the company for an expansion coming within 12 months. I'll be working a summer job as well as the company to pay for next years schooling.