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Naming Your Business and it's Status
The first step is to decide on a name for business In Canada and what its legal status will be.
Sole Proprietorship (personal name) is used as a simple means to start a business. This means that all personal and company assets and liabilities are under the personal name. The bank account , tax account, leases, assets, bills remain under the owners personal name. All legal documents are signed personally.
Partnership is used when more than one person owns the business. Owners have personal financial interest and liability . Profit or loss at the end of the year is shared by owners on their personal taxes. As well as any liabilities or obligations.
Master Business License is registered with the government when the owner(s) want to share financial interests and Liability with the business while
creating a visual separation of sorts. The business is able to have an operating name, open up bank accounts, tax accounts, legal documents , while they
are responsible for all debts and obligations of the business.
LLC Incorporated Companies This is used to legally separate the business from the owner(s). Both the owner and the business operate independent of one another. The owner is not responsible for liabilities arising except in certain circumstances.
Example of a start up Flower Business
PARTNERSHIP Kathy decides to take a business partner. This partner brings lots of talent and money to expand the business. At this point they decide to name the business and register it as a partnership. Both partners are now legally responsible for the company liabilities. They call the business " Flowers
Galore". A company bank account, and tax account is setup under Flowers Galore. As time carries on the business is so successful that they need to rent a shop. The bills with their suppliers grow as do their clients. They are now being asked for contracts with shipping dates etc.,
LLC (Incorporated Company ) Both owners are now aware that should the company falter they will be responsible for debts and obligations. They worry that if a contract goes sour they may be sued. They decide to incorporate and limit their personal liabilities for company debts and obligations. They incorporate as Flowers Galore Ltd. Now the company and owners are separate. This means the incorporated company must have its own bank account, tax accounts, legal documents etc., Each owner will become known as a shareholder and gain shares in the company. In some cases the
shareholders can be personally responsible for debts such as government tax accounts. By incorporating the company gains added protection, no one else can use the name or close variants.