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Understanding the Different Forms of Business
A sole proprietorship refers
to an individual who operates a business, and is generally the simplest way to
set up business. The sole proprietor is subject to unlimited liability - this
means that the sole proprietor is fully responsible for all debts and
obligations related to his or her business. A creditor with a claim against a
sole proprietor would normally have a right against all of the sole proprietor's
assets, both business and personal.
A partnership refers to an agreement in which two or more persons combine resources to carry on business with a view to making a profit. A partnership/shareholders agreement should be drawn up, with the assistance of a lawyer in order to establish the terms of the business, and to protect the partners/shareholders in the event of a disagreement or dissolution of the business. Partners share in the profits of the partnership according to the terms of the agreement.
In a general partnership, all
the partners share the management of the business, and each partner is
personally liable for all the debts and obligations of the business. Thus, each
partner is responsible for and must assume the consequences of the actions of
the other partner(s).
In a limited partnership,
some of the partners are general partners who control and manage the business
and may be entitled to a greater share of the profits. Other partners are
limited - they contribute only capital and/or property, contribute no services,
take no part in control or management and are liable for debts to a specified
extent only. The specific requirements for a limited partnership must be drawn
up in a legal document prepared by a lawyer, and the limited partnership is
registered with MGS.
A corporation is a “person” created by law that is capable of indefinite life and is separate from its shareholders or members. It owns property in its own name, acquires rights, obligations and liabilities, enters into contracts and agreements, and has the capacity to sue or be sued, as would a natural person.
A business corporation is formed by one or more persons to carry on business for profit. The primary advantage of incorporation is limited liability. Additionally, a corporation is typically more attractive to investors and financial institutions, may set up pension plans and profit-sharing stock options, and does not cease operations upon the death of a shareholder or principal of the corporation.
A not-for-profit corporation is created for the purposes of carrying on charitable, religious, professional, sporting or patriotic objectives, without pecuniary gain. Generally, there are five types of not-for-profit corporations: 1) general such as ratepayers or trade associations; 2) sporting and athletic organizations; 3) social clubs; 4) service clubs; and 5) charities.
Business or Style Name for a Corporation
When a corporation
carries on business under a name other than its legal corporate name, it must
register the trade or business name under the Business Names Act. The business or trade
name cannot end with any of the legal endings (Limited, Limitee, Corporation,
Incorporated, Incorporee, or the abbreviated forms). The registration must be
renewed every five years.
A trademark is a word, picture, symbol or any combination of these that is used to identify the goods and/or services of a person or company. In Canada, a trademark is registered for a period of 15 years from the date of registration and may be renewed every 15 years without limitation. While it is not mandatory to register a trademark, it is strongly recommended to do so – it is prima facie evidence of ownership and is easier to protect than an unregistered mark. A trademark registered in Canada grants the owner exclusive rights to use that trademark in Canada – it does not have validity in any other country. If you sell your products or services in other countries, it is recommended that you register your trademark in that country as well.
A trademark is different from a trade name. A trademark identifies the goods or services marketed under its protection. A trade name identifies a company or business.
The information contained in this section is of a general nature only, and is not intended to constitute advice for any specific fact situation. OnCorp Direct Inc. does not provide legal advice or counselling. For further assistance or legal information, please consult a lawyer.
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