Sole Proprietorships

A sole proprietorship is a business owned by one individual and operated for his or her own account without the involvement of other individuals, except employees. Business decisions are solely the result of the owner's abilities and preferences. The owner receives all benefits flowing from the business, including income and assets, and is correspondingly responsible for all of its liabilities and obligations. This includes an owner being held personally responsible if someone is harmed by his or her product or injured on the business premises. All of the owner's personal property, bank accounts and other assets may be seized to satisfy the liabilities of the business. The income or losses of a sole proprietorship are also combined with the other earnings of an individual, for income tax purposes.

Many small businesses start as a sole proprietorship because these are very easy to establish. If you operate a sole proprietorship under a business name different than your own name (for example, "Joe's Construction"), it will be necessary to register your business name with the Companies and Personal Property Security Branch of the Ministry of Government and Consumer Services for Ontario. Apart from this, there are virtually no legal requirements to start up a sole proprietorship, other than obtaining any necessary licenses or permits from a municipal, provincial or federal authority which are required to conduct your particular business.

Sole proprietorships can be very appealing because of their low cost and absence of regulations and restrictions. On the other hand, a sole proprietor is exposed to different risks than the owner of a corporation and will be unable to take advantage of tax rules that are available to corporations when the business becomes financially successful. For more information to decide whether a sole proprietorship is best for you, consult one of our experienced corporate lawyers.