It’s quite common for people to decide they want to start their own business once they’ve retired. However, before they do go into business for themselves, it’s a wise idea to research the differences between various business entities. It is, afterall, an extremely important and essential first step when launching a company. You’ll want to get it right!
By having the right business structure in place from the outset a new business owner will be more able to protect their personal assets, capitalise on tax advantages, and ensure their business operates seamlessly. So, where do you start?
Once you decide on what kind of business you’ll be operating, the next step is to select the kind of corporate structure that best suits it. What follows are some best practices for setting up what’s known as a business entity. For personalised advice, consider reaching out to your credit union advisor!
Decide Which Structure’s Right For You
Conduct some research which relates to the different types of entities available to an individual who wishes to start a business. Doing so will enable you to decide exactly which type of business structure is right for you. You’ll want to look into the differences between, and features of, the following three common types of business structure: sole proprietorship, partnerships, and corporations. While some of these structures are inexpensive to set up, incorporation may involve a significant initial fee.
Each structure has its own advantages and disadvantages, so it’s important to understand the pros and cons of each before making a decision. You want to be sure what you choose suits your company/business needs. Things to take into consideration are, for example:
- What type/size is my business?
- How much income do you expect to bring in?
- Are there more owners other than yourself? How many?
- What risks are associated with the business?
Enlist Some Professional Advice
It can be a complicated process when setting up a business entity, so it’s important to seek out professional advice. Consulting with a professional will help eliminate any doubts you may have when making your decision. Your credit union advisor along with both an accountant and a business lawyer can help you understand the differences between the above-mentioned common business structures and the legal and tax implications of each.
Once you’ve identified the right business entity for your company, you’ll need to take the necessary steps to make it legal.
1. Register Your Company
Depending on which type of structure you choose, you may need to file paperwork with your province and/or with the federal government. You may also need to obtain licences, permits, and other documents to legally operate your business.
2. Know The Legalities
It’s important to understand the legal implications of setting up a business entity. This includes understanding the different types of business entities and the laws, regulations, and taxes that apply to each. It’s also important to understand the legal obligations of the entity and the owner(s).
3. Keep Accurate & Up-to-Date Records
This includes keeping track of all financial transactions, sales tax, contracts, and other important documents. It’s also important to file all necessary paperwork with the provincial and/or federal government, such as year-end or monthly tax returns, sales tax, annual reports, and any other pertinent documents on time. Hire an accountant and/or a bookkeeper to ensure accuracy and timely tax filing/reporting.
By following these best practices for setting up a business/company, you can be sure that you have the right structure in place to protect your personal assets, provide tax advantages, and ensure your business runs smoothly.
Note: A sole proprietorship is the easiest to set up and the least complicated structure to administer, especially if you intend to go it alone.