chapter 5

Business Organization


Your Options

(i) Sole Proprietorship
(ii) Partnership
(iii) Corporation

Whether you’re just starting out or deciding on the right structure for your existing company, understanding the law around business organization is important. You’ll have to assess the nature of your business to figure out which option will afford you the most benefits.

Sole Proprietorship

This is the most common structure for online storeowners, and also the easiest to run and set up. Although you need to have the correct permits and register the business in your province, no separate entity is created. Your assets as a business owner and those of the company are one and the same. Taxes that the business owes will appear on your personal tax return. Your company can evolve beyond a sole proprietorship in the future if need be, but this is a simple and low–cost way to start out and operate your online shop.


(i) Easy to set up and run.

(ii) Tax relief available if
business is not doing well.

(iii) Control of all business
decisions and profits.



(i) If business is doing well, you could be put in a higher tax bracket.

(ii) Not a separate business entity.

(iii) You are responsible for all debts or actions against the company.


A partnership is another common structure for small businesses. These are formed when two or more individuals are co-owners of a business venture. This structure allows individuals to pool their assets and skills to increase their chances of success.

With this form of organization, remember to focus on the human element. There’s always a chance that a friendly partnership can change in the future. For this reason, make sure to have a lawyer assist you when drawing up a partnership agreement. Selecting the right partner is important because you’re liable for the debts and actions that they incur on behalf of the business.


(i) Allows for a division of work, capital and profits.



(i) Not a separate entity.

(ii) Both partners are liable for the actions of the other in the business.


The incorporation process is more complicated and costly, but does have many potential benefits for your online business. One of the most notable differences about this business structure is that the corporation becomes a separate entity from you as the owner. You’re not personally financially liable for what happens to the corporation. There are also very beneficial tax incentives for this type of organization. Based on the nature of your business, you can choose to incorporate federally or provincially. Click here to get further information about federal incorporation, as well as your province’s processes and rules.


(i) Separate entity.

(ii) Limits your financial liability.

(iii) The corporation survives the death of shareholders or sale.

(iv) Tax advantages.

(v) Improves your credibility.



(i) Heavily regulated.

(ii) Requires extensive
record keeping.

(iii) More expensive to form
(there are fees associated with incorporation).

4 Steps to Incorporation

Name your business — Even if you’ve been operating under a business name for some time, be sure to check the registry to ensure no one else is using that name.

Get a business number — This number will identify your business to the government. Click here to register your number.

Decide whether to incorporate federally or provincially — Provincial incorporation is sufficient for most online storeowners. This process is less expensive and easier to navigate than the federal option. A federal corporation allows you to do business under the same name in all provinces, but it’s more complicated so be sure to seek the advice of a lawyer when completing this step.

Register for GST/HST account — If your company makes more than $30,000 a year, you must register for a GST/HST account with the government. Even though it isn’t mandatory if you make less than the set amount, it’s beneficial to register for the account either way.

Choosing a Business Structure

It's important to consider the unique aspects of your business when deciding which organizational structure to choose. Although some options have benefits on paper, they may not be a worthwhile choice for you. There are detailed and helpful resources available from the Government of Canada (Canada Business Network). The checklists, information and planning strategies can help you make the best choice for your business. Before finalizing your decision, consult a lawyer to make sure you’ve made a sound choice and that the process is completed properly.


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Being aware of and obeying the rules that apply to you as an online business owner is an important aspect of running your shop.

Protecting your brand, your assets, and maintaining a positive customer relations are all affected by your ability to understand and obey the law.

The law is fluid and can always change! The resources provided to you in this guide will allow you to stay up to date and make sure you are aware of requirements placed on you.

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