A lot of people ask me that question: “When I register my business, should I register as a Proprietorship or a Corporation? Well, that can depend on a lot of things. First is location. Different states, provinces, municipalities require certain particular processes.
The terminology of proprietorship and corporation may be specific to certain areas. In the United States, it may be called something else. We won’t get into those specifics here because they do vary from one location to another.
You will need to get in touch with your “Small Business” government center in your area and find out the different types of businesses that are available to you and what the equivalent business terminologies are to the above types of business mentioned.
However before you go there, get familiar with what starting and running a business is all about. Do a search on the Internet, visit Government, Banks and Small Business web sites. You will then have a better idea of what you will need to ask when you look into the registering of your business
Here in Canada we can register for a sole proprietor, a private partnership or a corporation. Personally, my take on it is, until the business makes money, keep it simple as a proprietorship, because in my experience, incorporating takes a lot of your time and money. Time with filling and filing forms and reports, and money in additional fees and the extra services of an accountant needed just to stay within the regulations.
Whereas with a proprietorship, you need to do your filing at the same time as you do your personal income tax filing and you can do it through your tax return professional. If the business doesn’t do well, there is a lot more involved in closing down a corporation then there is in closing a proprietorship. That’s my experience, but you have to do your own research as to what is best for you in your local area.
When you do your pre-registration research, think about what it is that you want to start… what type of business is it going to be. Do a brainstorm and write down all the details of what you really, really want to offer as your service or product, who your customers are going to be, where you will find them.
Quite often, the registration process requires a very specific name that identifies the type of business it is. Example: (Name) Management Company vs (Name) Business Management Company or (Name) Computer Repairs Company, etc.. They also often ask for 3 choices in case the first ones already exist. So be prepared. Find out if that is the case where you are located.
Then, before registering your business, do a quick financial business plan for yourself. Figure out how much sales your business is going to have to bring in to cover cost of sales, operating expenses and your salary. To figure this out, write all the expenses you can think of, including the salary you want, add them up and you will get a minimum figure that your business will have to bring in sales in order to cover its operation. Then you double that for direct cost and other operating expenses you have not thought of yet.
This will help you find out if the business is viable. It will also tell you if you need to borrow money or not to start the business. Then you’re ready to register if all of the research and preparation work prove to be positive./dmh