Question

You decide to start a business. Distinguish between sole proprietorships and corporations on the basis of each of the following

1. process for creation of the business( Alberta,Canada )

2. extent of government regulation( Alberta, Canada )

Answer 1

1. Process of creation of business
Sole Proprietorship

A sole proprietorship are the most common type of business, the easiest to set up. It occurs when an owner operates a business with no other form of business organization. He is the Sole owner, fully responsible for all the debts related to the business. All profits belongs to this single entity and personally liable to any claims made by creditors to meet the debt.
Advantages of Sole Proprietorship are :
It is Easy and less expensive to Register, Less Regulatory burden, Direct control of decision making,Minimum working capital for start-up, Tax benefits if loses occur, Easier to Account and  All profits are yours.
A major drawback of sole proprietorships is that there is no limited liability for the sole proprietor; all business and personal assets may be seized in satisfaction of the sole proprietor’s business obligations and liabilities. i.e. all commitments including losses and liability associated with the business are the sole proprietor’s responsibility. A sole proprietorship under a name other than your own, will need a Master Business License.
To Submit as a sole proprietor you may need to:
A. Register your business with the provinces and territories where you plan to do business
B. Get a federal business number and tax accounts
C. Apply for any permits and licences your business may need from the federal, provincial/territorial and municipal governments
This sort of form is simple and can easily be created with a few government forms. In most provinces there is a small registration fee is $60 to register your business and this is valid for 5 years.

Process For Registering an Sole Proprietorship in Alberta , Canada

Statute says that each person who:

(1) is engaged in business for trading, manufacturing, contracting or mining purposes,

(2) is not associated in partnership with any other person or persons and uses as the person’s business name some name or designation other than the person’s own, or the person’s own name with the addition of “and company” or some other word or phrase indicating a plurality of members in a firm

shall file with the Alberta Registrar a statement in writing of the fact.

Which means if you are using a name other than your own and you are not in partnership with anyone else, you must register a Declaration of Trade Name in order to switch on business in Alberta as a sole proprietorship.

A Declaration of Trade Name for a sole proprietorship must be filed within six months of starting business under a name other than your own.

How to register :

The data's you will need to provide to the provider is your full name, your residence address, a description of the business you will be conducting, the city in which the business will be conducted, the name of the business, the date of the business first commenced, your occupation and a form of identification. You will be required to provide a driver’s licence no., a birth certificate no., a passport no. or a health card no. The form does not have to be originally signed. The identification provides the government with your true identity.

The form is called a Declaration of Trade Name specified to the Partnership Act (Alberta).

If housing address of the sole proprietor changes, the sole proprietor has 30 days in which to change his address. He/she must file an Alberta Declaration of Address Change showing the new address, if he/she wishes to maintain the Sole proprietorship

Sole proprietorships are provided with Federal Business Numbers by the federal government. The numbers have extension numbers on them for adding the GST number, Import / Export number and the Payroll number. If there are no employees you do not need the payroll number. This number is not required if you do not import / export. If the business is not making more than $30,000 you do not require a GST number although you can register voluntarily.

Where as A corporation is

A corporation is an self made legal entity that exists separate and apart from its owners (shareholders). Primarly, the corporation acts as a ‘person.’

As a ‘person,’ a corporation can:

Purchase, Trade and Own Assets, including land, make agreements, prosecute, be prosecuted

You do not required to do a big trade to register as a corporation. A compact business with only one owner can also register as a corporation.

The service provider that processes your application will invoice you a government fee and a service fee.

Follow these steps to apply

1. Choose a name : it should be distinctive, descriptive and legal
2. You need to get an Alberta NUANS report and review it to make sure there is no other corporation with an identical name or a name that is too similar to your proposed corporation name. As business names, identically named corporations are not allowed. The NUANS report retain the proposed name for 90 days. The full report, whether an original or fax copy, must be submitted with the incorporation details and must be less than 91 days old.
3. Collect information needed for incorporation
4. Record the address : The registered office needs to be a physical location in Alberta, so that the corporation can get legal documents delivered.
The records address, if not the same as the registered office, should be physically located in Alberta. You will need a mailing address in Alberta for the corporation if you do not have mail delivered to the registered office.
5. Select a director : Appoint at least one director for your corporation and record that information on the Notice of Directors. They must be adults and at least one quarter of the board must be Canadian residents.
6. Submit the application
You need to take your forms to a registry representative or authorized Alberta service provider. Those documents are mentioned below
a) incorporation information forms:
b) Articles of Incorporation
c) Notice of English/French Name Equivalency (optional)
d) Notice of Address
e) Notice of Directors
f) NUANS report
g) valid ID
h) fee payment
If your information match the requirements, the service provider will enter it into the Corporate Registry computer system and give you a certificate of incorporation. You will receive an email when your federal business number is issued.

2. Extent of Government regulations

All sole proprietorship must comply with federal, provincial and municipal government business regulations. These legislation concern business permits, tax collection, keeping records of your business transactions, and regulations about employees.
a. Business Permit: Regardless of whether you conduct business from a commercial office or from your home, you may be required to obtain a business permits. Business permits are issued by your municipal licensing board and are usually inexpensive. Specialty permits or provincial or federal permits can also be required. For example, if you sell liquor, you will need a provincial liquor licence.
b. Taxes : Business profits of a sole proprietorship are not taxed separately, rather, they are included in the business owner’s tax return, and taxed at the sole proprietor’s personal tax rate. The business may also be accountable for other types of taxes, depending on the nature of the business. For example, if the business imports goods, it will be accountable to pay duties on the items imported.
c. Business Accounting records : You will need to maintain records of your business transactions including sales records, bank statements, expenses and cancelled cheques. business datas must be kept apart from the owner’s personal finances.
d. Regulations on employees : Employee insurance premium can be deducted from tax of employees salary. Register on workers safety insurance board and other employee entitlements.

Whereas in Business Corporation
All business Corporation must comply with various federal, provincial and municipal government regulations. These laws concern business permits, tax collection, keeping records of your business transactions, and regulations about employees. Corporations also have administrative demands, such as keeping minute books and holding annual meetings.
a. Business Permits : Regardless of where you conduct business, such as a commercial office, retail space, manufacturing plant, or from your home, you may be required to obtain a business licence. Business permits are issued by your municipal licensing board and are usually inexpensive. Specialty permits or provincial or federal permits can also be required. For example, If you own a restaurant, you will need a permit to sell food.
b. Taxes : Business profits of a corporation are taxed separately from its shareholders. Therefore, the corporation will file a separate corporate income tax return. The Organization may also be responsible for other types of taxes, depending on the nature of the business. For example, if the business imports goods, it will be responsible to pay duties on the items imported.
c. Business accounting records : All businesses are required to maintain proper records of business transactions including sales records, bank statements, expenses and cancelled cheques. Business datas must be kept separate from the shareholders’ personal finances.
d. regulations on employees : If a corporation has employees, it will be required to deduct Employment Insurance premiums, Canada Pension Plan contributions, and income tax from employee salaries. These discounting, along with your employer’s contribution to Employment Insurance and the Canada Pension Plan, must be submitted to CRA by the 15th day of every month. The deduction amounts are set by the federal government.
If your organisation has employees, you may also need to register with the Workplace Safety and Insurance Board (WSIB). The Board provides funds for people who are injured at work. Not all types of jobs require that the employee be registered. The WSIB motivates and prefers online registration, but they will still help businesses register by telephone, in person, by mail or fax. Contact the WSIB for more information.

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