How to setup a Sole Proprietorship in Ontario, Canada?
Sole proprietorship, also known as a proprietorship or a sole business, is a type of business that is owned and operated by a single individual. Other individuals do not participate or own the business. This is the most simplest form of operating a business.
A sole proprietorship is simple to setup, you can operate the business under your personal name. If you desire to use an operating name you are able to register a Master Business License and operate under an operating name. The requirements for setting up a sole proprietorship are outlined in the provincial legislation.
The shortfall with a proprietorship is that the sole proprietor is personally liable for the business. There is no legal separation between the business and its owner. This creates unlimited liability from creditors and other business debts.
Key Features of a Sole Proprietorship:
- You can establish a sole proprietorship easily and instantly
- Inexpensive to setup
- Income and expenses reported on your personal tax return
- You can mix business and personal assets
What are the setup cost?
The setup costs are relatively low. To Register a Master Business License online the government fee is $60. There are additional fees for name search and enhanced business name search.
How is a sole proprietorship taxed?
A proprietorship is not a separate legal entity and is taxed based on the proprietors personal income. A separate tax return is not required. The income or losses of the proprietorship will be taxed at the applicable marginal rate of the individual. If the business is profitable this may put you in a higher tax bracket.
There is no need to obtain a CRA business number for a sole proprietorship. However, in certain circumstances you will be required to register a HST number. If you have employees you will be required to register a payroll number. All of which can be done over the phone by calling the CRA business line.
The income and expenses from the sole proprietorship can be reported on your T1 Personal Income Tax return on the T2125 Statement of Business Activities form. You will be required to keep all your receipts for income tax purposes.
Our accounting firm is located in Mississauga and Brampton
We have offices in Mississauga and Brampton. Contact our firm to setup a sole proprietorship. We can help you understand the tax and accounting obligations of s a sole proprietorship.Google+