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Choosing a business structure is one of the first and most important decisions you will make as a business owner. Your business structure can have a big impact on your success: it will affect your taxation and legal liability, as well as succession planning when it comes time to close or sell your business.

Sole proprietorships, partnerships, and corporations are the most common types of business structures. You can also choose to structure your business as a co-operative or social enterprise or non-profit. There are multiple steps required to get your business set up legally, not just registration of the business, so let’s dive in!

Sole Proprietorship

If you structure your business as a sole proprietorship, you become the sole owner. It also means that you will be personally responsible for any debts or obligations incurred by the business.

Why Choose Sole Proprietorship

  • Simplest business structure to set up—faster and less complicated
  • Less paperwork to manage
  • Do not have to share decision-making or management responsibilities with other partners
  • Simpler tax preparation and filing
  • Keeps your costs low
  • Reduces some of the government regulatory considerations
  • Appropriate for businesses that are relatively low risk
  • Effective structure for testing a business idea

Why Avoid a Sole Proprietorship

  • You assume all debts and obligations incurred by your business
  • You have unlimited liability—your personal assets may be seized if the business cannot meet its financial obligations or is sued.

Find out more about sole proprietorships from the Canada Business Network.

Setting Up a Sole Proprietorship

Setting up a sole proprietorship is relatively simple compared to other business structures: choose a unique business name, register, and license your business.

Choose a Unique Business Name

There is no law preventing two sole proprietorships from having the same name. You can have the same or a similar name as other businesses, but be careful—they might take you to court to protect their name. It’s better to make sure your name is unique enough to avoid legal action or confused customers.

Though not required, consider getting an Alberta Business Names Report or NUANS report to make sure your business’ name isn’t too similar to another already in existence.

Sole proprietors may also use their own personal name as the business name. If you decide to use your own personal name to operate your business under, it can only be your first name and last name with no additions, deletions, or changes (i.e. “John Smith”). Using your own personal name means that you don’t have to register your business name—since you already own your own name—and can avoid having to complete a Declaration of Trade Name form.

Register Your Business with the Provincial Government

You must register your business in Alberta, and any other province you plan to operate in.

To register your business in Alberta, file a Declaration of Trade Name form at any Government of Alberta registry office.

To register your business in British Columbia, Saskatchewan or Manitoba, see Service Alberta’s guide to the New West Partnership Trade Agreement (NWPTA). This agreement makes it much easier to register your business in British Columbia and Saskatchewan.

To register your business in other provinces, see the Canada Business Network’s provincial and territorial business registration information.

Acquire Necessary Municipal, Provincial, & Federal Permits & Licenses

Registering your business isn’t enough—you still have to make sure you have the right permits and licenses before you can start doing business. Many businesses will have to get municipal, provincial, and federal permits or licenses to operate.

See our permits and licenses page to find out what you need.

Partnership

A partnership is when two or more individuals or corporations do business together in partnership. A partnership can be a very flexible business structure—you can expand or limit liability and decision-making authority to suit your business’ needs.

Why Choose a Partnership

  • More resources: partners can improve your access to capital
  • More capacity: more invested people to spread out management duties
  • More expertise: different partners will bring different experience and skills

Why Avoid a Partnership

  • More risk: you take on all risk and liability for your partner’s actions

Partnerships can involve a lot of risk. Make sure you have a partnership agreement drafted to protect yourself, or consider starting a corporation instead to limit your liability.

Types of Partnerships

General Partnership

In a traditional partnership model, all the partners share in the profits and risks of the business. Each partner has unlimited liability for the debts of the business—your personal assets can be seized if your business owes money. If your partners do anything wrong with the business, you are also held responsible.

Limited Partnership

Limited partnerships have two different types of partners: general partners and limited partners.

General partners are responsible for managing the business. They have unlimited liability (the same as a general partnership).

Limited partners are only liable for what they’ve contributed to the business—they can only lose the money they’ve invested. Limited partners do not manage the business.

Limited Liability Partnership

A limited liability partnership (LLP) protects the partners from the debts of the business or the actions of other partners.

Limited liability partnerships are only available to some professions:

  • Chartered Professional Accountants
  • Medical doctors
  • Chiropractors
  • Dentists
  • Optometrists
  • Lawyers

Get more detailed information on partnerships from the Canada Business Network.

Setting Up a Partnership

Establishing a partnership is similar to a sole proprietorship, but with different forms involved.

Choose a Unique Business Name

Partnerships can have the same or a similar name as other businesses, but be careful—other businesses might take you to court to protect their name. Make sure your name is unique enough to avoid legal action or confused customers.

Though not required, consider getting an Alberta Business Names Report or NUANS report to make sure your partnership’s name isn’t too similar to another already in existence.

Register Your Business with the Provincial Government

You must register your business in Alberta, and any other province you plan to operate in.

To register your business in Alberta, file a Declaration of Partnership form at any Government of Alberta registry office.

To register your business in British Columbia or Saskatchewan, see Service Alberta’s guide to the New West Partnership Trade Agreement (NWPTA). This agreement makes it much easier to register your business in British Columbia and Saskatchewan.

To register your business in other provinces, see the Canada Business Network’s provincial and territorial business registration information.

Acquire Necessary Municipal, Provincial, and Federal Permits and Licenses

Registering your business isn’t enough—you still have to make sure you have the right permits and licenses before you can start doing business. Many businesses will have to get municipal, provincial, and federal permits or licenses to operate.

See our permits and licenses page to find out what you need.

Corporation

Corporations have rights and responsibilities similar to individuals, and offer you limited liability as a business owner—your personal responsibilities are completely separate from your business’. However, in some cases you could still be held legally accountable should you do anything negligent or fraudulent. Corporations are the most complex type of business structure, with regulation and reporting requirements you must follow throughout the life of your business.

Why Choose a Corporation

  • Limit your personal liability: Corporations are different than other business structures because shareholders’ liability is limited to the money they’ve paid for shares. They cannot be held personally responsible for any debts or legal trouble the corporation might run into.
  • Create a separate legal entity: In Canada, corporations have the same rights and obligations as a natural person. This separate legal status continues until the corporation is dissolved, even if the people that started the business die.
  • Greater tax options: Once your business’ revenue reaches a certain point, you will pay less in taxes if you incorporate.
  • Raise capital more easily: It is easier to raise capital investments with a corporation because you can sell shares.

See Corporations Canada for more on why you should incorporate your business.

Additional reasons you may want to incorporate:

  • If you’re thinking about having business partners or hiring employees
  • If you’re making substantial revenue (i.e. more than $50,000)
  • If it’s required to get hired for a contract or to go on-site
  • If you need a WCB account
  • If you’re signing a commercial lease or signing a major contract
  • If you’re making or selling a product
  • For unlimited existence

Why Avoid a Corporation

Starting a corporation can have some added challenges:

  • More expensive to form, organize, and manage: Ongoing administration costs are much higher than other business structures.
  • More heavily regulated: You must meet certain government requirements every year to keep your corporation in good standing.
  • More detailed record-keeping required: You must keep annual shareholder meeting minutes, a list of directors, a registered office address, and more to be included in your minute book.

Canada Business Network has detailed information on corporate business structures and how to set up your business as a corporation.

Setting Up a Corporation

Setting up a corporation can be a very complex and difficult process. Consider hiring a lawyer to help you register and run your corporation. If you decide to incorporate your business without the help of a lawyer, contact an Alberta registry office. They sell do-it-yourself kits that will help you navigate the process of incorporating your business.

Follow these steps to incorporate your business:

Decide if You Will Incorporate Your Business Federally or Provincially

To start a corporation, you must submit an application to either the federal government or the provincial government (not both). In general, you should incorporate federally if you plan to do business in multiple provinces across Canada.

Federal Incorporation:

  • Allows your business to operate in any province in Canada
  • Makes it easier to protect your name across Canada
  • Better if you have multiple offices in multiple provinces across Canada (although you still have to extra-provincially register your business in any province you operate in, even after you incorporate federally)
  • At least 25% of your business directors must be Canadian residents. If there are fewer than four directors, at least one must be Canadian.

Find out what you need to incorporate your business federally from Corporations Canada.

Provincial Incorporation:

  • Can only operate in the province where incorporated (unless you have extra-provincial registration)
  • At least 25% of your business directors must be resident Canadians
  • Allows you to save on extra-provincial registration costs if you only operate in Alberta

Find out how to incorporate your business provincially at Service Alberta.

Get a NUANS Report to Ensure Your Corporation Name is Unique

Unlike sole proprietorships and partnerships, corporations must have a unique name. You can choose your own unique corporation name or have a “numbered name” assigned to your business by the government (e.g. “785843 Alberta Inc.,” sometimes called a “numbered company”) when you file your Articles of Incorporation.

If you choose your own name, you must obtain a NUANS (Newly Upgraded Automated Name Search) report from an authorized NUANS search house to prove that your corporation name is unique (for both federal and provincial incorporation).

A NUANS report will reserve your corporation name for 90 days. That means you have to complete the incorporation of your business within 90 days of getting your NUANS report.

Learn how to get a NUANS report from Service Alberta.

Submit Incorporation Documents to the Government to Officially Incorporate Your Business

To officially incorporate your business, you must file three documents:

  1. Articles of Incorporation: Tells the government how your business is organized, who owns it, and where it’s located.
  2. Notice of Directors: Defines who is in charge of your corporation.
  3. Notice of Address: Tells the government where your business can be reached.

For provincial incorporation, submit these documents to an Alberta registry agent. The provincial government will give you a Certificate of Incorporation. Provincial applications can sometimes be processed in one business day.

For federal incorporation,you may submit these documents online or by mail. See the Corporations Canada website for more information on how to incorporate your business federally.

If your federal incorporation application is complete and accepted, Corporations Canada will give you a Certificate of Incorporation.

Filing incorporation papers can be complex and difficult—it will take time and effort to learn about all the steps involved. Alberta Registry Offices sell do-it-yourself kits that can help you with the provincial incorporation process. Or, if you are able to hire a lawyer, he or she can help facilitate the incorporation process and manage this complex process for you.

Register Your Business in Every Province You’ll Be Operating In

“Registering” and “incorporating” your business are two different processes. Once you have your Certificate of Incorporation, you will also have to register your business provincially if:

  • You incorporated your business federally: you will have to register your business provincially in every province you will operate in.
  • You incorporated your business provincially outside of Alberta: you will have to register your business provincially in Alberta and in any other province you will operate in.

To register your corporation in Alberta, go to the Service Alberta website to find out how to register an extra-provincial corporation. You can register your business at any Alberta registry office.

To register your business in British Columbia or Saskatchewan, see Service Alberta’s guide to the New West Partnership Trade Agreement (NWPTA). This agreement makes it much easier to register your business in British Columbia and Saskatchewan.

To register your business in other provinces, see the Canada Business Network’s provincial and territorial business registration information.

Acquire Necessary Municipal, Provincial, and Federal Permits and Licenses

Registering your business isn’t enough—you still have to make sure you have the right permits and licenses before you can start doing business. Many businesses will have to get municipal, provincial, and federal permits or licenses to operate.

See our permits and licenses page to find out what you need. Also make sure you obtain a business number from the federal government and open any other accounts you need.

Keep a Minute Book

A minute book is where corporations keep track of their board meeting minutes and resolutions, shareholder agreements, and more. It must be kept at the corporation’s registered office.

Talk to a lawyer about starting a minute book, or see the Corporations Canada website for more information. You can also purchase do-it-yourself kits that include sample documents that you can easily adopt for your own corporation’s minute book.

Update the Government of Any Changes to Your Address or Directors, and File an Annual Return

Any time something changes in your corporation—a new mailing address, registered office, or directors—you will need to notify the federal or provincial government (depending on which one you incorporated with). When making changes to your corporation, you will be required to pay all necessary fees associated with it.

You must also file an annual return every year to keep the government updated on your corporation’s activities.

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