10 Questions
What is the simplest, fastest, and least expensive way to set up a new business?
Sole proprietorship
What is the duration for which a registered business name is valid?
5 years
What is the main advantage of a sole proprietorship?
Easy and inexpensive way to start and run a business
What is the main disadvantage of a sole proprietorship?
Unlimited liability
What is the minimum number of people required to form a partnership?
Two
What is the type of partnership where all partners are equal in power and liability?
General Partnership
What is the duty of partners in a partnership?
Fiduciary duty to the partnership
What happens to the business if the sole proprietor dies?
The business is dissolved
Why is it advisable to conduct a NUANS search?
To determine if the desired name (or a very similar name) is already being used
What is the tax implication for a sole proprietor?
The sole proprietor can deduct business losses/expenses from personal income
Study Notes
Carrying on a Business in Ontario
- Three ways to carry on a business in Ontario: Sole Proprietorship, Partnership, and Corporation
Sole Proprietorship
- Consists of only one person, the sole proprietor
- Simplest, fastest, and least expensive way to set up a new business
- Typically used by small businesses with few or no employees
- No legal distinction between the sole proprietor and their business
- Name of a Sole Proprietorship can be the sole proprietor's name or a registered business name
- Registered business name is valid for 5 years and can be renewed
- Offence to carry on a business using an unregistered name
Control of a Sole Proprietorship
- Sole Proprietor (SP) has complete control of business
- SP is entitled to 100% of business profits
- Income earned by the business is treated as SP's income
- SP is 100% responsible for debts and liabilities of business
- Judgment is enforceable against SP
Advantages of a Sole Proprietorship
- Easy and inexpensive way to start and run a business
- No legal formalities involved (other than registering business name)
- Little regulation from government
- SP has complete control of business
- SP owns all the profits
- SP files only one income tax return
- May deduct business losses/expenses from personal income
Disadvantages of a Sole Proprietorship
- Unlimited liability: SP is personally liable for all debts and obligations of the business
- May be difficult for SP to raise capital
- Business may be jeopardized if SP is ill
- SP may be taxed at a higher personal tax rate if business is profitable
- SP is not considered an employee (no employee benefits)
- Business ends if SP dies
Partnerships
- Consist of two or more people who carry on business together with a view to making a profit
- Partnership is not a legal entity separate from its owners
- Each partner is responsible (together with other partners) for the debts and obligations of the partnership
- Income earned by partnership is income of partners
- Partners share profits/losses equally (unless there is a partnership agreement that states otherwise)
- Partners have fiduciary duty to the partnership
- Three types of partnerships in Ontario: general, limited, and limited liability
This quiz covers the three main types of business organizations in Ontario: sole proprietorship, partnership, and corporation. Learn about the advantages and disadvantages of each type of business organization.
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