{"id":861026,"date":"2020-06-10T22:22:56","date_gmt":"2020-06-11T02:22:56","guid":{"rendered":"https:\/\/www.finder.com\/ca\/?p=861026"},"modified":"2025-10-08T16:46:58","modified_gmt":"2025-10-08T20:46:58","slug":"choosing-the-right-business-structure","status":"publish","type":"post","link":"https:\/\/www.finder.com\/ca\/banking\/business-banking\/choosing-the-right-business-structure","title":{"rendered":"How to choose the right business structure for your company"},"content":{"rendered":"

When setting up a business in Canada, you will need to determine the right business structure. To select the right business structure, you first need to consider the risks and benefits of each business type \u2014 as well as the time and cost involved. To help, here is a simple guide to explain the difference between each business structure, in Canada, along with some advantages and disadvantages of each type.<\/p>

What are the 4 types of business structures in Canada?<\/h3>
Business structure<\/th>Highlights<\/th>Ownership<\/th>Liability<\/th>Type of tax filing<\/th><\/tr><\/thead>

Sole proprietorship<\/a><\/h4>

\"Symbol<\/p>

\u00a0<\/p><\/td>

Simple to set up; limited paperwork<\/td>1 owner<\/td>Owners are personally liable<\/td>Personal tax return (T1)<\/td><\/tr>

Partnership<\/a><\/h4>

\"Symbol<\/p><\/td>

Best for testing new ideas with other business owners

Includes:<\/p>

  • General<\/li>
  • Limited<\/li>
  • Limited liability partnerships (LLPs)<\/li><\/ul><\/td>
2+ owners<\/td>General partnerships:
  • All owners are personally liable<\/li><\/ul>

    Limited Partnerships and Limited Liability Partnerships (LLPs):<\/p>

    • General partners (managers) are personally liable, limited partners (investors) are not<\/li><\/ul><\/td>
Partnerships can be formed by joining two or more people, corporations, trusts or partnerships, so the type of tax filing varies:
  • Personal tax return (T1)<\/li>
  • Corporate tax return (T2)<\/li>
  • Trust tax return (T3)<\/li><\/ul><\/td><\/tr>

Corporation<\/a><\/h4>

\"Symbol<\/p><\/td>

Best for scaling businesses and protecting personal assets from legal liability

Includes:<\/p>

  • Canadian-controlled private corporations (CCPCs)<\/li>
  • Other private corporations<\/li>
  • Public corporations<\/li>
  • Crown corporations<\/li><\/ul><\/td>
1+ owners<\/td>Business is liable<\/td>Corporate tax return (T2)<\/td><\/tr>

Cooperative<\/a><\/h4>

\"Symbol<\/p><\/td>

Best for people who share similar social or economic needs and who want to operate a business democratically.

In Canada, all cooperatives must be incorporated.<\/p><\/td>

1+ owners<\/td>Limited depending on members\u2019 specific roles (and other factors) as outlined in either federal or provincial legislation depending on how the co-op is incorporated:
  • If federally incorporated: Canada Cooperatives Act<\/li>
  • If provincially incorporated: each province has its own co-op legislation<\/li><\/ul><\/td>
Depends on whether the cooperative is classified as a for-profit, not-for-profit or charity under the federal Income Tax Act: