A sole proprietorship is a type of business structure. As, the name indicate the structure includes only one individual and the business. The individual is the sole owner or the sole proprietor of the business. Within this structure, there is no legal distinction between the sole proprietor and the business.
Here are some items to consider when operating as a sole proprietorship
- If you operate through a placement firm, you may be subject to EI and CPP deductions.
- Your fiscal year end will be on December 31 of each year.
- You may have to track your sub contractor expenses incurred in order to earn the contractor income.
- All business profits are included as personal income.
- Easy to set up business
- Low costs associated to set up business
- Direct control of business
- Easily and quickly adapt to market changes
- No corporate taxes
- It can be difficult to split income with other family members.
- Unlimited liability
- All sole proprietor’s assets are at risk of being taken by creditors, if debts cannot be paid.
- Legal claims arising from contract work may fall subject to all of the assets of the contractor.
- Income is taxable at your personal rate
- Difficult to raise capital
- Often the sole proprietor will advance all necessary capital for the business