April 2022 Economic Development Update:
Determining the legal structure is an important part of starting a business. There are a number of options from simple to more complex. Whether it’s a sole proprietorship, partnership, corporation or co-operative, the structure determines personal, tax and legal liabilities, so it’s critical to understand the pros and cons for each option. This article provides a high-level overview only, so speaking with a lawyer and accountant to help make the decision that’s best for you is strongly advised. Visit the Manitoba Companies Office for more details.
Sole Proprietorship. If you want to make your own decisions as an owner/operator and a simple, low-cost business set up with minimal administration, a sole proprietorship may be for you. Keep in mind, you as the owner are personally liable for all business debts. That means creditors may be able to recover debts against your personal assets like your home or car.
Partnership. If you are planning to go into business with one or more people, a partnership may be the right structure. Setup and administrative costs are relatively low. Decisions must be made jointly and each partner is legally responsible for the actions of the other partner(s). Partnerships must be registered with the Manitoba Companies Office.
Corporation. If you want your business to be a legal entity that is separate and distinct from you as its owner, incorporating may be the way to go. There are tax advantages and limited exposure for your personal assets but it is more expensive and complex for set up and ongoing reporting. All corporations based in Manitoba must be registered with the Manitoba Companies Office. If you want to do business outside Manitoba, you may have to register your business federally and in other provinces and comply with additional reporting requirements.
Co-operative. The co-operative model allows entrepreneurs to set up a business or organization to work with like-minded people towards a common goal. As a corporate legal structure, the model is highly versatile and found in every sector of the economy. Check out the wealth of free resources available at Co-operatives First, a non-profit organization that supports rural and Indigenous co-op entrepreneurs across western Canada
No matter what stage your business is at, I’d love to hear from you. If you’d like to discuss some ideas or get help narrowing down the options, feel free to reach out.