When starting your new business, the first step is deciding what form of business is best for you. Considerations such as the cost to start up the business, control of the business, simplicity of record keeping, and personal liability all come in to play. As a consultant, you will most likely be doing business as a sole proprietor or a corporation.

Sole Proprietorship

A Sole Proprietorship is the most straightforward and least expensive way to setting up your own business. In fact, as soon as you start doing business for yourself, you are doing business as a sole proprietor (in your own name). As a sole proprietor, you are the business. Only one person overseas all of the business decisions, and is thus entitled to all of the profits. However, the sole proprietor also assumes all of the liabilities and obligations of the business, meaning the owner has unlimited personal liability (ie, creditors can come after your personal assets for debt incurred by the company).

For more information on registering a business name for your sole proprietorship, and applying for a gst/hst account, please visit Business Registration On-Line.

Corporation

A corporation is a separate legal entity which exists under statute, and has the same rights and obligations as an individual. Since the corporation is a separate entity, your liability as a shareholder is limited to the value of how much you contributed to the company. This limited liability protects shareholders from creditors for debts incurred by the company. Although a corporation is relatively expensive to set-up, the potential tax savings, as well as the ability to engage directly in the dealings of your business with limited liability makes incorporation the business form of choice for most small business owners.