The sole proprietorship is often the legal form chosen by the self-employed to start up their business. As its name suggests, a sole proprietorship is operated by a single owner who has direct control over the direction he or she wishes to take the business. It’s easy and inexpensive to set up such a business, as there’s no need to register it unless the company is trading under a name other than the entrepreneur’s surname. What’s more, all profits accrue directly to the entrepreneur. Although sole proprietorship can be an attractive option for the self-employed, there are a number of disadvantages. The entrepreneur’s liability for the company’s debts and obligations is personal and unlimited (the entrepreneur’s personal assets are at the mercy of the company’s creditors). In addition, sole proprietorships are generally ineligible for subsidies, financing or certain types of licenses. These disadvantages often prevent the business from growing, leading entrepreneurs to pursue their activities in the form of a joint-stock company. A corporation can be incorporated provincially or federally. It is a legal entity in its own right, distinct from its shareholders. The liability of the shareholders, and of the entrepreneur as the company’s director, for the company’s debts, obligations and decisions, is limited. The joint-stock company also benefits from tax advantages and makes it easier to obtain financing. On the other hand, the start-up costs of a joint-stock company are somewhat higher, and it’s a more complicated structure to administer, as it’s governed by ongoing and annual regulations and obligations. In reality, the choice of whether to pursue a project as a sole proprietorship or a corporation is often self-evident.

By Mélanie Masson