Sole Proprietorships and Partnerships FAQ
- What is a sole proprietorship?
- What are the advantages of a sole proprietorship?
- What are the disadvantages of a sole proprietorship?
- What is a partnership?
- What is the difference between a general and a limited partnership?
- Do I have to register my business name?
- Do I need a lawyer to start a sole proprietorship or partnership?
- What is a Partnership Agreement and do I need one?
- How long will it take to register and how much will it cost?
1. What is a sole proprietorship?
A sole proprietorship is an unincorporated business that is owned by one person.
2. What are the advantages of a sole proprietorship?
A sole proprietorship is the easiest and least expensive type of business to start. It provides the business owner with the freedom and autonomy of complete oversight and control of the business. Under the law, the business and the person who owns it are considered to be one entity. As a result, the sole proprietor owns all the assets and is entitled to all the profits. If a sole proprietorship incurs losses the sole proprietor may apply those losses against other earned income to reduce personal income tax.
3. What are the disadvantages of a sole proprietorship?
As the owner of a sole proprietorship, you have unlimited liability. This means that you will be held personally responsible for any debts, liabilities or obligations that your business may incur.
4. What is a partnership?
A partnership is an unincorporated business that is owned jointly by two or more people.
5. What is the difference between a general and a limited partnership?
A general partnership consists of general partners, each of whom is involved in the management and operation of the business, contributes capital and is personally liable for the debts, actions and obligations of the business and the other partners. A limited partnership consists of general partners, as previously described, and limited partners. Limited partners are not involved with the management and operation of the business. The limited partners' main responsibility is to contribute capital. As a result, the personal liability of a limited partner is limited to the amount of capital he or she contributes to the business.
6. Do I have to register my business name?
Yes, unless you are using your personal name as the name of a sole proprietorship.
7. Do I need a lawyer to start a sole proprietorship or partnership?
There are no legal requirements for establishing a sole proprietorship or a partnership, other than to register the business name. It is always recommended to consult with a lawyer to ensure that you are structuring your business appropriately for your current and future business needs and that you are aware of all your legal obligations.
8. What is a Partnership Agreement and do I need one?
Although a Partnership Agreement is not mandatory for General Partnerships, it is generally recommended that the partners negotiate and draft a partnership agreement. Partnership agreements clearly define the roles and responsibilities of all the partners toward one another and in relation to third parties. Keep in mind that a partnership needs to be re-established if one of the partners should die. In the face of such events and other unforeseen circumstances, the best intentions of the partners may not be enough to keep the business operating. A sound Partnership Agreement will anticipate most scenarios and provide all the partners with viable plans and procedures for handling them.
9. How long will it take to register and how much will it cost?
Information on timelines and costs for our various sole proprietorship and partnership registration packages can be obtained by completing a Quick Quote.
For more detailed information on these, and related topics, please click on the links below:
- 8 Steps to Establishing a Sole Proprietorship or Partnership
- How to Create a Great Business Name
- What is a Name Search and When Do I Need One?
- How to Select the Best Structure for Your Business
The information presented in the document above is provided for reference purposes only and is
not intended to be a substitute for the appropriate legal advice of a competent, professional lawyer.
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