Sole Proprietorship
Sole proprietorship is simple to set up and dissolve because a person can start to carry on business for their own account (Anthony VanDuzer, The Law of Partnerships & Corporations).
Advantage vs. Disadvantages
Advantages:
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The benefit of operating as a sole proprietorship is that there is no distinction between the person and the business.
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As the sole owner, you have full control over all business decisions and operations.
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Establishing this form of business relatively simple and inexpensive compared to other business structures. You don't need to file complex legal documents or pay hefty fees to set up the business.
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As the sole proprietor, you are entitled to all the profits generated by the business. You don't need to share the profits with partners or shareholders, which can be financially rewarding.
Disadvantages
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This business form is not easily scalable and is good for relatively small sized businesses.
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The main disadvantage is unlimited personal liability, which is carries the following risks:
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Personal assets may be seized in fulfilment of the business obligations.
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Responsible for all personal wrongful acts or infringements and any wrongdoings committed by her employees in the course of their employment.
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Responsible for all sales, supplier, and employment contracts as well as business loans.
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Dissolution does not relieve of liabilities incurred while carrying out a business.
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Other Things to Consider:
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A sole proprietor is limited to direct borrowing when it comes to raising capital. Employment status-wise, a sole proprietor may not be an employee of their business, i.e., contract with self. Income or loss are reported on the personal income tax forms. Finally, registration of the business name does not provide for exclusive use.
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As for the legal requirements, the business name may be registered under section 2(2) of the Ontario Business Names Act (the “Act”). Registration is required if you intend to use any name other than your full name. There are restrictions on business names which we can discuss on the call. There is a fine of up to $2,000 for failing to file for mandatory registration (OBNA, s. 10(2). The Ministry of Government and Consumer Services charges a registration fee payable to the Minister of Finance through ServiceOntario (electronically: $60; by mail: $80). There are other options to pay this government fee. The turn-around time differs.
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Under licensing rules, a sole proprietor needs to obtain a Master Business Licence (ServiceOntario).