A sole proprietorship is the simplest form of business registration that is owned by an individual and is considered to be self-employed.
Published by Zoom Startups on 10th November, 2021.
A sole proprietor secures capital, establishes and operates a business, assumes all risks, accepts all profits and losses; and pays all relevant taxes. Any legal obligations arising out of this type of business activity are the proprietor’s responsibility. All assets, business or personal, can be legally used to discharge the liability. The risks extend even to your personal property and assets. Contact our expert consultant for advice today!
As a sole proprietor you pay personal income tax on the net income generated by your business. You may choose to register a business name or operate under your own name or both. If you operate as an individual, you invoice your customers or clients in your own name; if you operate under a registered business name then your clients and customers will be invoiced under the business's name. If your business has a name other than your own, a separate bank account is needed to process cheques payable to your business.
Once a sole proprietorship has been established, the business and its owner are considered the same from a tax and legal standpoint. Owners of sole proprietorships may use professionals to help with the legal and financial aspects of running the company. The business owner or sole proprietor is required to:
Ø Register a trade name
Ø Obtain a tax number
Ø Open a bank account
There are many types of roles that can be a sole proprietorship. Farmers, fishermen, consultants, shoemakers and more can be a sole proprietorship. You may need a license depending on what field you're in. Consult our qualified business professional at Zoom Start Ups if you are unsure whether your business requires a special permit.
Sole proprietors should fill out a T1 form and benefit return to report revenue and claim business expenses; calculate net income or loss as part of the owner's income. Other circumstances may apply to individual situations which may require a T1 return if the sole proprietor:
Ø has to pay taxes for the year
Ø disposed of capital property or had a taxable capital gain
Ø has to make Canada Pension Plan/Quebec Pension Plan payments on self-employed or pensionable earnings
Ø wants access to employment insurance for the self-employed
Ø wishes to claim an income tax refund, refundable tax credit, or GST/HST credit
Ø needs to claim the Canada child tax benefit
If you choose to start or buy a business, choose the right structure for your business; inquire about the advantages of incorporating your business. Prepare a professional business plan that gives you an excellent road map for your company and increases your chances of success with financing. We at Zoom Start Ups we can help make your dream of owning or starting your business a reality!