Research Organization Type; Part 4 Starting A New Business
We have found our business idea to be viable. Now is a good time to figure out the kind of organization it will be. There are four basic ones for business. Sole proprietor, Partnership, Corporation and Co-operative. A Co-operative can also be a non-profit organization but we will be focusing on for-profit business structures right now.
For a Sole Proprietor, the owner is self-employed but does not need to file a separate tax return for their business. This is a good way to start out with a small home-based business. In Canada self-employed are paying up to and sometimes more than 33% of their earnings. If a person goes into business and does not set up any business structure then they are a sole-proprietor and thereby self-employed.
Partnership owners are generally self-employed as well. There are two main types of partnerships, equal partnership or limited liability, which means that partners either share all responsibilities equally in the business or they don't. Partnerships are not incorporated. Each partner pays their own taxes and the business does not file any for itself.
Corporations are incorporated. They must hold general meetings and have minutes and a board. The business is an entity in itself. It is responsible for the debts incurred and the shareholders may lose their equity but not necessarily be liable for any losses. The business has a tax year which the taxes must be done and filed by a professional.
A Co-operative is relatively easy to set up. It can be used to leverage more than ten small businesses to be able to compete against larger businesses that may have more money to pay for advertising and marketing.
Much of this information can be found in greater detail on the internet. It is important to do the research to decide on the best business organization type. Once that is done it will be time to name and register the new business.
There is much thought that goes into planning a new business. Photo by Wix