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Understanding the Different Forms of Business

Sole Proprietorship

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.

If the proprietor carries on business under a name other than his or her own, the business name must be registered with the Ministry of Government Services (MGS) under the Business Names Act, and the prescribed fee paid. If the proprietor carries on business under his or her own name, without the addition of any other words, it is not necessary to register the business.

The business name registration is valid for five years, at which time it is necessary to renew the registration.


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.

General Partnership

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).

The names and addresses of all the partners must be registered with MGS and the prescribed registration fee paid. The partnership registration must be renewed every five years.


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, Limitée, Corporation, Incorporated, Incorporée, or the abbreviated forms). The registration must be renewed every five years.

(This type of business name registration may also be referred to as a trade name, a style name, carrying on business as ..., a division of ....)


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.

Comparison of Business Oraganization Types

  • Start-up costs are low
  • Owner has direct control
  • All profits go to owner
  • Less regulations than other forms of business
  • Minimal Requirements for working capital
  • Tax advantages for the small business owner
  • Unlimited liability
  • Difficult to raise capital
  • Lack of continunity
  • Start-up costs are low
  • Ease of formation
  • Additional sources of venture capital
  • Broader management base
  • Limited outside regulation
  • Possible tax advantage
  • Unlimited liability
  • Difficult to raising additonal capital
  • Divided authority
  • Difficulty in finding suitable partners
  • Partners can legally bind each other without prior approval
  • Lack of continuity
  • Limited liability
  • Continuous existence
  • Legal entity
  • Easier to raise capital
  • Ownership is tranferable
  • Specialized management
  • Possible tax advantages
  • Most expensive form of business to organize
  • Closely regulated
  • Charter restrictions
  • Extensive record keeping required
  • Double taxation
  • Shareholders may be held responsible in certain circumstances


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 does not provide legal advice or counselling. For further assistance or legal information, please consult a lawyer.