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Ontario|Business LawBusiness Law 205 Choosing a Form of Business If you have decided to start a business, or if you have already started one, it is important to decide what legal form of business will work best for you. There are three main forms of business to choose from. These are sole proprietorships, partnerships, and corporations. If you are going to start a business alone, you can choose between a sole proprietorship or a corporation. If you are going to start a business with at least one other person, you can choose between a partnership or a corporation.
There are important legal differences between the three forms of business. For example, both sole proprietors and the partners of a partnership are not considered legally separate from the business. The owners are personally responsible for every aspect of the business, and any profit or loss must be included on the personal income tax return of each business owner. In comparison, a corporation is considered legally separate from its owners. In fact, the law considers a corporation to be a legal entity, much like a person. The owners of a corporation do not usually have personal liability for the debts of the business or for any lawsuits that arise and the corporation is taxed separately from its owners.
There are many factors to consider when choosing the legal form that is best for your business. As a business grows, the advantages of the corporate business form usually outweigh the disadvantages. A lawyer can help you determine which form of business is best for your situation. You can obtain more information about the advantages and disadvantages of the different legal forms of business on Legal Line or by consulting with a lawyer.
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