What Form Of Business Organization Is Right For You?
The following chart is a list of possible advantages and disadvantages of the most common forms of business organization. For more information on how to register, click on each of the business organization titles.
Sole Proprietorship
Business owned by one person, called a “proprietor.”
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Advantages
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Disadvantages
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- Simplest and least expensive to set up
- Minimal registration requirements
- Owner in direct control
- Possible tax benefits (losses can be applied against other income of proprietor)
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- Owner assumes all risk of business; responsible for payment of all business debts. Creditors can seize your personal assets.
- Lack of continuity (ownership not transferable)
- Difficult to raise capital
- Possible tax disadvantages (profits must be added to personal income)
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Partnership
Business owned by two or more individuals or corporations.
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Advantages
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Disadvantages
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- Easy to set up and very flexible
- Limited regulation
- Partners provide sources of additional capital and skills
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- Partners assume personal liability for debts of business
- If disagreements arise, business can suffer
- More complex record keeping and tax returns
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Corporation
A separate legal entity which can enter into contracts and own property separately and distinctly from its owners who are the shareholders.
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Advantages
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Disadvantages
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- Limited liability (generally limited to individual’s personal investment in the business)
- Continuous existence (ownership transferable)
- Easier to raise capital (i.e. money for the business can be raised by selling shares)
- Possible tax advantages
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- More expensive and complicated to set up and maintain
- Extensive record keeping and complex taxation
- Closely regulated
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For information on how to register a sole proprietorship or partnership, visit the Business Registration page.
For information on incorporation, visit the Incorporation page.