3 Questions to help you find your perfect business structure.

Starting a business brings an exciting rush of possibilities. You have a great idea, the drive to succeed and the determination to make it happen. But before you print those business cards, you must make some key decisions – starting with your business structure. In Alberta, this choice affects everything from your taxes to your personal liability, so consider a few crucial questions before deciding.

Who will join you on this business adventure?

Are you flying solo or building a team? Your answer shapes your structure options, which include:

• Sole proprietorship: You’re the boss of everything – decisions, profits and responsibilities. It comes with simple tax filings but personal liability.

• Partnership: You and one or more people share ownership, profits and decisions, but a partnership comes with unlimited liability for partners and potential for conflicts.

• Corporation: A separate legal entity with multiple shareholders, limited liability and tax advantages.

For example, a sole proprietorship might work well if you want to open a coffee shop by yourself. But if you and your roommate want to start a web design company together, a partnership makes more sense.

How much financial risk can you handle?

Understanding your tolerance for financial risk is crucial. Sole proprietorships expose you to unlimited liability, meaning personal assets are at risk. On the other hand, corporations offer limited liability, protecting personal assets.

Let’s imagine Alex started a small landscaping business. As a sole proprietor, he had to use personal savings to cover costs when his company truck needed expensive repairs. If Alex had formed a corporation, he might have had more financing options.

How much paperwork are you willing to manage?

Each structure comes with different administrative requirements.

• Sole proprietorship: Minimal paperwork and low startup costs

• Partnership: Requires a formal agreement between partners

• Corporation: Most complex with annual filings, board meetings, and detailed record-keeping

Many Alberta entrepreneurs start with simpler structures and evolve as they grow. Keep in mind that the time you spend on administration can take away from building your business. Further, if you do not have the resources to manage these duties effectively, you can run into costly setbacks and conflicts.

Choosing the right business structure lays a strong foundation for your enterprise. As your business grows, you can always reevaluate and adjust your structure to suit new needs, but making informed decisions now can ensure smoother growth and success in the future.