Pros and cons of sole proprietorship in Canada

sole proprietorship in canada

A sole proprietorship is the oldest, simplest and most common form of organization for a company.

It’s a business owned by one person — the sole proprietor — and is unincorporated. Easy as that!

Quick facts about sole proprietorship in Canada

  • As the business owner, you own all assets, earnings, and profits. However, you also hold all the responsibilities (including legal and debt), obligations and liabilities.
  • If you establish a business in your own name, without adding any other words, you don’t have to register the business. You can either bill customers in your name, or register a business name and bill customers under that name, which must have a separate bank account. The law doesn’t distinguish between the business and its owner, and personal income tax must be paid on all revenue generated by your business.
  • If your revenues are more than $30,000, or if you have legal ownership of more than one business, you must register for GST/HST (one registration will cover all businesses).

Let’s take a look at some of the pros and cons of this type of ownership.

Pros of sole proprietorship

  • Least expensive form of ownership, low start-up costs.
  • Most freedom from regulation.
  • Simple to start and dissolve.
  • Complete control over the company and decisions.
  • Least working capital required.
  • Complete control over the income generated by the business.
  • Complete access to profits.
  • Easier to offset losses against other income.
  • Flexibility.
  • Easiest to exit.

Cons of sole proprietorship

  • Business owner is legally responsible for all debts.
  • Unlimited liability (not separate by law; can be personally liable for all debts even if it means paying debts with your personal assets).
  • Business can’t continue in absence of owner.
  • Harder to raise funds from personal savings or loans.
  • Higher personal tax rate.
  • Often harder to find high quality employees.
  • Limited resources and opportunities for growth.
  • Some employee benefits are not deductible from business income.

Want to learn more about sole proprietorship? Check out GoForth’s online streaming small business training!

Share this post:

Six tips for hiring and working with freelancers

Entrepreneurs know that hiring freelancers for their small business can be a great way to save money while still drawing upon the expertise of graphic designers, copywriters, marketers, bookkeepers and IT consultants. However, working with freelancers can be much different than working with employees. Here are some tips for successfully hiring and working with freelancers in your small business.

Don’t focus only on price when hiring a freelancer

You know that saying, “You get what you pay for”? When it comes to hiring a freelancer for your small business, it can ring very true. Sure, it could be that your freelance marketing consultant is 50% cheaper than anyone else because he only does it part-time and has a full-time job as well. However, freelancers that are willing to work for rates drastically lower than average often have to sacrifice some things in order to make those rates justifiable – they may need to work faster than usual, for example. Your end result may not be what you bargained for (no pun intended).

Trust your instincts

So you found a potential freelancer that seems great for your small business. Except for the overly-casual language he uses in his emails. Or his past work isn’t exactly the kind of thing you’re looking for. Or he takes three days to respond to your messages. Are any of these things dealbreakers for you? Unless you’re looking for a freelancer with an absurdly specific skill set, he’s not the only game in town. This is a business partnership that can mean lost time and money if it goes badly – not to mention what it could do to your mental state. Know what you’re willing to overlook and what you’re not – and stick to it.

Don’t do anything without a signed contract

Well, you can have an initial meeting or consultation, of course. But once your freelancer is hired, creating and signing a contract is the most important next step. This protects both parties and can also serve as a roadmap for the project. Include components such as deadlines, payment terms, rights and exactly what responsibilities both parties will have.

Give your freelancer clear guidelines

You need a new website, and you’ve found a freelance web designer whose portfolio looks ideal. But simply telling her, “I want a website that will stand out” won’t work. Provide clear guidelines, deadlines and goals to avoid any time-wasting confusion. Who is your audience? What are the project’s milestones? In what format will the completed product be delivered? Will the freelancer check in from time to time? Be as detailed as you can. Ensure your freelancer has all the information they need, and encourage her to ask questions.

Set realistic expectations for both parties

In your mind, you may think that three weeks is a reasonable amount of time for your social media consultant to get a buzz going about your company on Twitter, Facebook and other outlets. But is that really reasonable? Talk to your expert freelancer and find out what’s standard in the industry (and do your own independent research, too). Leave buffer zones in your project schedule in case something comes up. And don’t forget, freelancers have other clients who also have deadlines and expectations.

Deal with your freelancer directly

Or, at least, don’t give her three different people to report to. Putting your freelancer on the other end of a big game of Telephone can result in misunderstanding, missed components and the dreaded scope creep. Your freelancer should have very easy access to the person who will be giving final approval on the project to ensure goals are met correctly and quickly.

Do you have any other tips for working with freelancers in a small business? Let us know in the comments!



Share this post: