Deciding on the type of entity you want to use is an important initial step in the process of starting a new business, as the type you choose dictates a number of different aspects of your business: control, liability, funding, taxation, etc.

Below we have compared the 4 main types of business entities:

Sole Proprietorships, Partnerships, Franchises, and Corporations. Contact Juriscorp Law Offices where we can help you better understand these different entities, analyse the advantages and disadvantages of each, and ultimately get you started with the one that best suits your business venture.

 Sole ProprietorshipPartnershipFranchiseCorporation
Separate Legal EntityNoNoYesYes
Management & ControlAbsolute ownership and controlShare in management or appoint managing partners vs. limited partnersFranchisor has control over the franchiseeDirectors have control of the company but they are responsible for reporting to shareholders
Type of LiabilityUnlimited – Personal assets will be at risk if there is a business failureUnlimited or Limited – Depends on the type of partnership: General, Limited, Limited Liability, as well as the Partnership Agreement (PA)Exposure to liability as you generally will be required to indemnify Franchisor in the Franchise Agreement (FA)Limited – Corporate Veil – No personal liability for directors, officers, members, unless the veil is lifted
Formation Costs & FormalitiesSimple & inexpensiveLack of formalities and inexpensive to form – Draft and execute PASlightly more formal with formalities required – incorporating and entering into a written FACostly and requires multiple formalities: Incorporation, Minute Book, etc.
Transferability of InterestCan be difficult as often linked to individuals expertise in that area of businessDifficult to sell / buyout partners interest; UNLESS, this has been expressly provided for in PALook for assignment provision in FAEasy – sell your shares in the corporation
Financing & PropertyLimited financing – draw from personal funds or by loans, no access to public funds; Assets are all solely ownedLimited financing – draw from funds of each partner, no public funds; Assets are jointly owned or pursuant to PAAssistance to Franchisee from the Franchisor, but Franchisee is responsible for leasing space, purchasing supplies, etc.Raise public funds through share issue.; All assets are owned by corporation
Duration & TerminationDuration is limited to the ownerSet out in PA – fixed term, notice, death, bankruptcyDepends on FACompany’s can be struck for failure to file returns, Court Order, voluntarily, etc.
TaxationPersonal tax ratePersonal taxes on profits earnedFile Corporate Tax Return – Fixed rateFile Corporate Tax Return – Fixed rate
Regulatory BodyNilPartnership Act RSA 2000 Franchises Act RSA 2000Business Corporations Act RSA 2000

Are you starting a business?

Contact Us