Revelstoke is full of entrepreneurial spirit. People are quick to seek out gaps in the available services and to set up and provide services and products that will add to our city’s vibrant business community. If you are thinking about setting up a business, careful planning at the outset will help make it a little easier to handle your time consuming workload.
When starting a business, you’ll need a business license from the city and name approval from the provincial government. You’ll also have to decide which form you want your business to take. You may wish to work alone in a sole proprietorship, to work with others in a partnership, or to incorporate a company. The major considerations you’ll have to put your mind to are management of the company, tax advantages or disadvantages, and your personal liability for business debts.
A sole proprietorship is the simplest form of business organization. It is inexpensive and fairly simple to set up, but only suitable if you expect that you will be making all of the decisions for the business. Decision making in a sole proprietorship is fairly easy, as you don’t need to consult anyone else. You will also be able to write off business losses against your personal income for tax purposes. The major disadvantage of a sole proprietorship is that you will have unlimited personal liability for the debts of the business. If the business fails, you may lose personal assets (such as your house, savings, or car).
A partnership may be suitable if you are contemplating going into business with another person. Generally, you will enter into an agreement that details each person’s rights and responsibilities with respect to the business. You will share in management of the company. In terms of tax, you may also be able to deduct business losses against your personal income. Like a sole proprietorship, a major disadvantage is that you could be personally liable for the debts of the business. That may include liability for the wrongful acts of your partner. Because of this risk, you may wish to form a ‘limited liability partnership’ which will limit your risk of loss for your partner’s actions.
A popular option for businesses is to incorporate. The major advantage to this form of organization is that incorporation forms a separate legal entity from its owners, which means that your personal assets will generally not be at risk for debts of the company. A corporation is also immortal, which means that your business will not automatically end if you or your partner dies. However, a corporation may be more expensive to set up and maintain than a sole proprietorship or a partnership. Additionally, a corporation will not provide you with some of the tax advantages that you might have with a sole proprietorship or partnership. If you are going to incorporate, consider entering into a shareholders’ agreement. Things often seem positive at the outset of an entrepreneurial adventure, but relationships can fall apart, and it’s good to be prepared. A bit of money on the agreement at the outset will save you a lot in legal fees if you end up disagreeing about the direction of the business.
You will also have to consider a number of other government requirements that may apply, including licenses and registrations that are particular to your business, zoning and municipal by-laws, and rules and regulations pertaining to your employees.
Starting a business may be a daunting task, but a bit of forethought will help make the process easier as you go along.