Guide on Different Types of Businesses: Corporation vs Partnership vs Sole Proprietorship | Business Exchange


Guide on Different Types of Businesses: Corporation vs Partnership vs Sole Proprietorship

August 26, 2016 | The Business Exchange 0 Comments

Guide on Different Types of  Businesses: Corporation vs Partnership vs Sole Proprietorship


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When starting a business in Canada you must register your business with the government but there are some important things to consider before doing so. First, you will need to decide on a name for your business. Second, you will need to choose the best types of businesses ownership for your particular situation. Should you decide that incorporating your business is the best route, then you can decide to either incorporate federally or provincially. We recommend seeking legal advice before registering your business.



You want to choose a name that is right for your business. Your name should be unique, explain to consumers what you do or which services you provide and should be memorable.



A trade-mark is defined by, the Canadian Intellectual Property Office which is operated by the Government of Canada, a combination of letters, words, sounds or designs that distinguishes one company’s goods or services from those of others in the marketplace.

A trade-mark must be unique. It is important to a company because over a period of time, a trade-mark stands not only for the actual goods and services you sell, but also for your company’s reputation and brand. A trade-mark can be a very valuable intellectual property.

By registering your trade-mark, you protect it under law from misuse by others, and you gain exclusive rights to use it throughout Canada for 15 years (a term that you can renew).

A trade-mark is extremely important in franchising. When you purchase a franchise they are giving you permission to use their name so it is imperative that the franchisor owns the trade-mark for its name and/or logo.



The best way to protect your corporate name is to register a trade-mark to obtain exclusive rights to use across Canada. The Trade-Marks Office can provide guidance, it is recommended that you consult with a trade-mark agent or lawyer.




Contact Trade-mark office By Phone 

8:30 a.m. to 5:00 p.m. (Eastern time)
Monday to Friday (except statutory holidays)
Toll-free (Canada and the U.S.) to the Client Service Centre
International calls only

TTY (Cannot receive voice calls on this line)

Contact Trade-mark office Fax

819-953-CIPO (2476)
819-953-OPIC (6742)

Contact Trade-mark office In Person

The Client Service Centre staff can answer your questions from Monday to Friday, 8:30 a.m. to 5:00 p.m. in Gatineau, at the address below. You must make an appointment before your visit if you want to meet with specific employees.

Canadian Intellectual Property Office
Place du Portage I
50 Victoria St., Room C-229
Gatineau, QC K1A 0C9



This corporate name search tool allows your to compare you proposed business name to existing registered corporations in Canada and Canadian trade-marks.

If you choose to incorporate your business, you will need a NUANS report to incorporate in most provinces and federally. The province of Quebec currently does not provide data for NUANS. If you plan on doing business in Quebec you should search Quebec’s Enterprise Register, Quebec’s database of corporations.


How Do I Do a NUANS Search?

You can acquire a NUANS report from their self-serve website for companies wishing to incorporate federally or in the Northwest Territories. Here is a link to their site:

To incorporate in other jurisdictions you will need to hire a NUANS Registered Member. Here is a link to find NUANS Registered Members across Canada:


NUANS Office Contact Info


Contact Trade-mark office By Phone 

Toll free at 1 888 81-NUANS or 1-888-816-8267
Telephone assistance available Monday to Friday
from 7:00 a.m. to 8:00 p.m. Eastern Time, excluding holidays.
TTY (for hearing-impaired)
Toll free at 1 866 694-8389

Contact Trade-mark office By Email

Contact the NUANS Help Centre at



Now that you have decided on a name you must decide on the types of businesses structures that is right for your business. There are 3 common types of businesses structures in Canada. You can incorporate, have a partnership or sole proprietorship. We will go through the advantages and disadvantages of each of the type of business structures.



A sole proprietorship is a business that is owned by one person and it is the easiest, least expensive type of business to start. The business and the person who operates the business are considered to be the same legal entity.


thumbs up green Advantages:

1. It is easy and inexpensive to set up a sole proprietorship;
2. Least amount of regulatory burden;
3. Direct control of decision making;
4. Minimal working capital;
5. Tax advantages if the company is not initially making money;
6. All profits go directly to the owner.

thumbs-down red Disadvantages:

1. No legal separation between you and your business;
2. Unlimited liability. Your personal assets are not protected. If you have business debt then your personal assets could be seized to pay creditors;
3. Income would be taxable at your personal rate. If your business is profitable it may bump you to a higher tax bracket;
4. Difficult to raise Capital.



A partnership is a business that is owned by two or more people. It is also an easy and inexpensive type of businesses to start.

There are two types of partnerships: general and limited.

In a general partnership, all the partners share in the profits and losses of the business and are personally and jointly responsible for all liabilities. General partners are responsible to operate the business and they are personally and jointly responsible for all liabilities.

In a limited partnership, there are both general and limited partners. Limited partners are not involved in the daily operation of the business and they are only personally responsible for losses up to the amount of capital they originally contributed to the business.

When establishing this business model you should have a partnership agreement drawn up by a lawyer to ensure that your interests are protected, have clear terms of the partnership and that legal requirements are met for a limited partnership.


thumbs up green Advantages:

1. It is easy and inexpensive to set up a partnership;
2. Start-up costs to be shared equally by partners;
3. Equally share in management, profits and assets;
4. Tax advantages if the company is not initially making money.


thumbs-down red Disadvantages:

1. No legal separation between you and your business;
2. Unlimited Liability. Your personal assets are not protected. If you have business debt then
your personal assets could be seized to pay creditors;
3. Difficult to find a suitable partner;
4. Possibility to develop conflict between partners;
5. You can be held financially responsible for business decisions made by your partner.



A corporation is a separate legal entity from its owner and shareholders. This can be done federally or provincially.

thumbs up green Advantages:

1. Limited Liability. The biggest benefit of incorporating a business in Canada is the separation of your personal and business obligations. Therefore, you cannot be personally liable for the debts or actions of the corporation therefore offering protection on your personal assets. The question you need to ask yourself is, can you afford to place your personal assets at risk to satisfy any claim against your business?
2. Separate Legal Entity
3. Continuous Existence
4. Ownership is Transferable
5. Raising Money can be Easier
6. Possible Tax Advantages
7. Increase you Credibility and Business-Worthiness

thumbs-down red Disadvantages:

1. Corporations are closely regulated
2. More Expensive. It is more expensive to register a corporation than to set up a
sole proprietorship
3. Paperwork. It will require more paperwork and record-keeping than running a
sole proprietorship

Should I Incorporate Federally or Provincial

There are a number of benefits of incorporating a business federally.

1. Heightened Name Protection. Corporations Canada applies strict tests before
granting a company rights to a business name. Once approved it is protected across the nation. This status is second only to trade-mark protection;
2. Right to Carry on Business Anywhere in Canada.
3. Recognition.

There are a few drawbacks to incorporating federally.

1. Register in Provinces and Territories you wish to do business in;
2. More paperwork annually;
3. Federal Incorporation costs more.

Who Can Form a Corporation?

Under the Canada Business Corporations Act (CBCA) one or more people who are at least 18 years old and of sound mind and who are not bankrupt can form a corporation.
One or more companies can also incorporate a company.

Do I need a Lawyer to Incorporate?

You do not require a lawyer to incorporate a business, although a lawyer may provide valuable advice for your particular situation.

What Percentage of Directors must be a Resident of Canada?

As per the Canada Business Corporations Act, 25% of the directors must be “resident Canadian” (as per the definition in the Immigration Act).




Federal Incorporation

Corporate Registry – Find a Business Registry

British Columbia
Register your Business Online

New Brunswick
Incorporation / registration of a business

Incorporation of non-profit companies (New Brunswick)

Registration of an extra-provincial corporation (New Brunswick)

Newfoundland and Labrador
Registry of Companies (Newfoundland and Labrador)

Northwest Territories
Corporate Registries — Business Corporations

Corporate Registries — Societies

Nova Scotia
Business incorporation and registration

Legal registries (Nunavut)

Start, run and change a corporation

Business name registration information (Ontario)

Prince Edward Island
Corporate services — Business name registration

Incorporate a business (Quebec)

Incorporating your business in Saskatchewan

Business registration in the Yukon


Do I have to Get a Corporate Seal?

A corporation that is operating under the Canada Business Corporations Act is not required to have a corporate seal. If you wish to have one you can order one from a legal stationary store. Not for Profit companies are required to have a corporate seal.



A minute book is essentially a binder that holds all important documents pertaining to your corporation. Corporations in Canada are not legally mandated to keep a minute book but it is recommended. Minute books should include the following:

1. Certificate of Incorporation
2. Articles of Incorporation
3. By-Laws
4. Director and shareholder resolution
5. Minutes of director and shareholder meetings
6. Register of the officers and directors
7. Register showing the number of shares issued of each class of shares
8. Record of debt obligations of the corporation
9. Stated Capital – numbered of issued and outstanding shares
10. Documents filed with government departments
11. Shareholder agreements
12. Share certificates, if used
13. The corporate seal, if used


You will need to maintain the minute book, by keeping up-to-date as the corporation does its business including:

1. Resolutions from the annual meetings of shareholders and directors
2. Electing directors each year
3. Appointing accountants or auditors for each year
4. Approving financial statements
5. Records of loans to or from shareholders
6. Declared dividends
7. Management bonuses paid
8. Issuance or transfer of shares
9. Changes in directors or officers
10. Changes to how the corporation runs. ◊


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