Common Types of Legal Structure for Businesses In Mississauga
October 31, 2022 | Written by: Sohail Afzal
Your legal structure is important no matter what type of organization or business you run. The structures you chose help you determine the types of taxes you pay, how much personal liability you face and how easy or difficult it is to raise money. It’s important to take some time to understand each type of business structure before deciding which one is best for your company in Mississauga.
Today’s overview of our blog will introduce the common types of business structures you need to know about.
Understand each structure so that you can make an informed decision the next time you set up your business.
3 Types of legal Structures for your business
Most Canadian businesses fall into three legal structures: sole proprietorships, partnerships, and corporations. You could be one of them, or you could opt for any one of them. We really want you to understand each business structure before making a decision.
It is a type of business owned and operated by a single person. The owner is responsible for all aspects of the business, including debts, losses, and liabilities.
The focal advantage of a sole proprietorship is that it’s relatively easy and inexpensive to set up. There are no complex paperwork or filing requirements.
However, sole proprietorships also have some disadvantages. The owner of this type of legal structure has unlimited liability, which means they’re personally responsible for all the debts and liabilities incurred by their business. It can put their personal assets at risk.
It is a type of business owned and operated by two or more people. Partners share responsibility for the business, including debts, losses, and liabilities.
Like sole proprietorships, partnerships are relatively easy and inexpensive to set up. And like sole proprietorships, the partners have unlimited liability. This means they’re personally responsible for all debts and liabilities incurred by the business.
The main advantage of a partnership is that it allows two or more people to pool their resources and expertise. This can make it easier to start and grow a business.
However, partnerships can also be complicated. Partners like all others may have disagreements about the direction of the business or how to divide profits. And if one partner leaves the business, the remaining partners may be liable for that partner’s share of the debts and liabilities.
It is a legal entity that is separate from its owners. The owners’ personal assets are protected from business debts and liabilities. This type of structure itself is responsible for its debts, losses, and liabilities.
The focal advantage of a corporation is that it offers limited liability protection to its owners. It means the owners are not personally responsible for the debts and liabilities of the business.
However, corporations also have some disadvantages. They’re more expensive and complex to set up than sole proprietorships or partnerships. And they may be subject to higher taxes.
Now that you understand the three main types of business structures, you can start to decide which one is right for your specific business in Mississauga. Consider your business goals and objectives, the amount of personal liability you’re willing to take on, and the amount of money you have to invest. If you’re still unsure, contact a trusted accounting firm in Mississauga, like GTA accounting. They will help you navigate the process and make the best decision for your business.
We hope this blog was helpful and it has given you a better understanding of the different types of business structures. Each has its own advantages and disadvantages, so choosing the right one is important for your business. Contact us today!
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.