Being self- employed or an independent contractor has many benefits and risks associated.
Understanding the basics of self-employment
You are planning on being self-employed, how is this different from a traditional employee?
First, there are three main forms of business you can use:
Sole proprietorship: is an unincorporated business that is owned by one individual only. While it is the simplest of the types of businesses, it also offers the least amount of financial and legal protection for the owner. Sole proprietorships do not create a separate legal identity for the business. Therefore, the owner is fully liable for all liabilities incurred by the company. An entrepreneur may choose this option if they want to retain full control of the business. Additionally, it is a relatively easy and inexpensive process to establish a sole proprietorship. There are also tax benefits, as income is considered the owner’s personal income and therefore only taxed once.
Partnership: is an association or relationship between two or more individuals, corporations, trusts, or partnerships that join together to carry on a trade or business. Each partner contributes money, labour, property, or skills to the partnership. In return, each partner is entitled to a share of the profits or losses of the business. The business profits (or losses) are usually divided among the partners based on the partnership agreement. In a general partnership, each partner is fully personally liable for the debts, contractual obligations, and torts resulting from the partnership’s operation.
Standard Corporation: is a single entity which may be comprised of individuals or a company but is separate from its owners. Among the most important features of a corporation is limited liability, which means that its owners can participate in the share of profits, but not the corporation’s liabilities. Along with limited liability, corporations possess the ability to own assets, enter contracts, sue or be sued, and borrow money. The creation of a corporation occurs following the proper filing of Articles of Incorporation (also called a Charter or Certificate of Incorporation) with the relevant government department or authority. Every corporation is comprised of shareholders, directors and officers. The directors are responsible for supervising and managing the corporation’s affairs.
| Forms of Business | Benefits |
| Sole proprietorship: | Easy to register Unlimited personal liability Only registered under provincial government Simple personal tax structure No name protection Single owner Ownership cannot transfer |
| Partnership: | Unlimited personal liability Easy tax structure No Name protection Multiple owners Ownership easily transferable |
| Standard Corporation: | the right to use corporation name across the chosen province limited personal liability protection of company name rights lower corporate tax rates better access to capital and grants single / multiple owner ownership easily transferable |
Now that you know the difference in the types of business. The question you need to ask yourself is, What Form of Business Is Best for You?
Please follow the link below to start your entrepreneurial journey today. It will take minutes to register your business online!
Get started with Your Independent Contractor Business