The Advantages of a Sole Proprietorship in Canada

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Advantages of a sole proprietorship include low start-up costs and tax deferrals.
Advantages of a sole proprietorship include low start-up costs and tax deferrals. (Image: business colleagues preparing for business meeting image by Vladimir Melnik from <a href='http://www.fotolia.com'>Fotolia.com</a>)

There are many advantages to being a sole proprietor. When choosing to become one, it is important to look at the advantages of doing so. In Canada, those advantages include ease in set-up and freedom. These and other advantages make it one of the more common starting points for small businesses in the country.

Control

A sole proprietor has full control over his company. Any decision over costs and direction of the company are completely up to the proprietor, including the company name. Also, if the proprietor chooses his own name as a business name, the business does not have to be registered in Canada. Additionally, he does not have to deal with a Board of Directors or co-owners. The proprietor also has the ability to sell or dissolve the business at his own discretion.

Starting-Up

Starting up a business as a sole proprietor is relatively easy in Canada. There are minimal start up costs, which may be nothing more than essential equipment such as a computer and software, advertising, or products to sell. There are also few registration requirements; those that are necessary include a certificate of compliance, business license, a business name and number, and tax registration. A Certificate of Registration and business number are assigned by the Canada Customs and Revenue Agency, the fees for which vary by province.

Taxes

A sole proprietor in Canada has several tax advantages as there are only a few government stipulations that must be followed. There is a lower tax rate compared to a corporation and monetary losses of the business may be applied against other income of the proprietor. Income is reported on a personal income tax return form. This form only needs to be filed if the proprietor has to pay tax for the year, has disposed of capital property, is required to make Canada Pension Plan/Quebec Pension Plan payments, or has been ordered to by the Canadian government. A Government Sales Tax/Harmonized Sales Tax registration number is not needed until the business reaches $30,000.00 in sales.

Personal Reasons

A sole proprietor also has many personal advantages. In addition to having decision-making power, he can also have a sense of pride or even bragging rights if his business does well. He does not have to work for anybody but himself. He can control the pace and growth of his company and experience his own learning curve, which becomes dramatically easier with a second and even third personal business. And since exclusive jurisdiction over a sole proprietorship in Canada remains with the provinces, meaning the owner would not have to deal with federal government laws as much as larger business do, he can take more time for himself and his business.

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