by Monica Beffa

Startups

Ontario Business Entities for Startups

Do you need a lawyer when you start your small business? Contact us to find out how our Beffa Law could benefit your business.

Types of Business Entities

There are 3 main business entities an entrepreneur should consider in Ontario:

Sole Proprietorships

A sole proprietorship is the simplest form of business organization, it is easily to set up and it is automatically created as soon as you begin to carry on business in your name. You are the sole owner, and fully responsible for all debts and obligations related to your business. All profits are yours to keep. Because you are personally liable, a creditor can make a claim against your personal assets as well as your business assets in order to satisfy any debts.

PROS:

• Easy and inexpensive to register
• You have direct control of decision making
• Minimal working capital required for start-up
• You can enter into contracts with other people and entities
• You can hire employees
• Some tax advantages (deducting your losses from your personal income, and a lower tax bracket when profits are low)
• All profits go to you directly

CONS:

• You are solely responsible for your actions and the actions of any employees you may have.
• You have unlimited liability (if you have business debts, claims can be made against your personal assets to pay them off)
• You cannot bring anyone as a partner & can be difficult to raise capital on your own
• Income is taxable at your personal rate and, if your business is profitable, this could put you in a higher tax bracket
• Lack of continuity for your business if you are unavailable

This is the best type of business organization to start off with. Then, as your business grows, you can decide if alternative business is more suitable.

Partnerships

A partnership is automatically formed when two or more individuals or corporations carry on business together with a view of profit.

The Partnerships Act (Ontario) determines the rights and obligations of each partner, unless the partners enter into a formal partnership agreement. In a partnership, your financial resources are combined with those of your business partners and put into the business. You and your partners would then share in the profits of the business according to the legal agreement you have drawn up.  The partners are the sole owners and cannot be employees.

In a General Partnership, each partner is jointly liable for the debts of the partnership. In a Limited Partnership, a person can contribute to the business without being involved in its operations. A Limited Liability Partnership is usually only available to a group of professionals, e.g. lawyers, accountants or doctors.

While all of the benefits of the partnership accrue to the partners, each partner is personally responsible for the obligations undertaken in contracts entered into by the partners. This is important because it establishes the terms of the partnership and can help you avoid disputes later on.

Hiring a lawyer to help you draw up a partnership agreement will save you time and protect your interests.

PROS

• Fairly easy and inexpensive to form a partnership
• Start-up costs are shared equally with you and your partner(s)
• Equal share in the management, profits and assets
• Tax advantage — if income from the partnership is low or loses money (you and your partner(s) include your shares of the partnership in your individual tax returns)

CONS

• There is no legal difference between you and your business
• Unlimited liability (if you have business debts, personal assets can be used to pay off the debt)
• Can be difficult to find a suitable partner
• Possible development of conflict between you and your partner(s)
• You are held financially responsible for business decisions made by your partner(s)

Corporations

A corporation has its own legal entity. Incorporation can be done at the federal or provincial/territorial level. To set up a corporation, you have to file articles of incorporation with the government. When you incorporate your business, it is considered to be a legal entity that is separate from its shareholders. As a shareholder of a corporation, you will not be personally liable for the debts, obligations or acts of the corporation. Further, the corporation is taxed on its own, and you pay tax on what the corporation pays you, by salary or dividends.

It is always wise to seek legal advice before incorporating.

PRO

• Separate legal entity
• Owns assets and has the limited liabilities
• Owns property in its own name and ownership is transferable
• Has continuous existence
• May sue on its name and may be sued
• Can be an employer, you can be an employee
• Easier to raise capital than it might be with other business structures
• Possible tax advantage as taxes may be lower for an incorporated business

CONS

• A corporation is closely regulated
• More expensive to set up a corporation than other business forms
• Extensive corporate records required, including documentation filed annually with the government
• Possible conflict between shareholders and directors
• You may be required to prove residency or citizenship of directors

by Monica Beffa

Parents And Grandparents Sponsorship Selection Process

CANADA TO ACCEPT 20,000 PARENTS/GRANDPARENTS SPONSORSHIP APPLICATIONS IN 2019

Immigration, Refugees and Citizenship Canada (IRCC) declared it will end in 2019 its controversial lottery selection process under the Parents and Grandparents Program . IRCC will revert to a first-come, first-served approach to inviting interested sponsors to apply.

The news announced on August 20, 2018 also said that the IRCC will accept up to 20,000 new sponsorship applications in 2019 through the Parents and Grandparents Program (PGP).

Existing selection process

In 20177 IRCC’s implemented a randomized selection process for applications to the Parents and Grandparents Program. At that time, the government claimed that a randomized approach would level the playing field and give everyone the same opportunity to be selected to sponsor their parents/grandparents. Not everyone agreed, and the decision was widely criticized as unjust. Families complained that the randomized process gave them no way of knowing if they would ever be selected to reunite with their loved ones.

The changes announced last month are IRCC’s  response to these concerns. The IRCC said that “[a]s a result of listening to stakeholders and closely examining the PGP Program, the government is making further changes to the application intake process that will streamline access to the program and improve client experience.”

Immigration Minister Ahmed Hussen said that these changes are evidence of the Government of Canada’s “commitment to helping families live, work and thrive together, in Canada.”

Will it Help?

According to IRCC,  its inventory of PGP applications dropped from a peak of 167,000, in 2011, to just under 26,000, in June 2018. This reduction of inventory has allowed the IRCC to increase its intake quota to 20,000 in 2019.

This new cap doubles IRCC’s original applications cap for 2018, which was set at 10,000 and was increased to 17,000 in July 2018. To meet this increased 2018 quota, the second round of invitations sent by the IRCC at the end of July will have until October 5, 2018 to submit a complete application.

Those interested in sponsoring their parents/grandparents in the 2019 will have to complete an Interest to Sponsor form online at the beginning of the year. Even though a a first-come, first-served selection approach will not fully guarantee approval of every application, the increased yearly quota is definitely good news for the Canadian sponsors

At a glance

How will the parents and Grandparents program change?

Read More About Family Sponsorship