The essence of a sole proprietorship is that a single person operates a business either under their own name, or under a Trade Name, and it is the simplest (and most common) form of carrying on business in Alberta. As the name implies, there can only be one person carrying on that business at any one time. If there is more than one person carrying on the business, it will be deemed to be a partnership.
The ultimate decision making power rests with the sole proprietor. Normally sole proprietorships are found in smaller businesses where the number of persons involved and the need for operating capital are both relatively small and the business does not need some of the tax driven structures or arrangements that are often required with larger organizations. Like any other business, employees can be hired and fired, and payroll deductions and taxes must be paid.
i. Liabilities of Sole Proprietor
Liability for a sole proprietor is unlimited, as the proprietor is personally liable for all of the debts and other liabilities of the business.
Debts or obligations include the normal debts of the business, as well as any liabilities or damages caused by the negligence or any wrongful conduct of the proprietor or any of the staff, liabilities to Canada Revenue Agency for payroll deductions, GST and the like.
The ultimate decision-making authority is the sole proprietor, although some or all of that power to decide can be delegated to others, who may, or may not, have job titles or job descriptions.
The business may be carried on under the name of the sole proprietor, or under a trade name of the proprietorship.
iii. Start-up Requirements
There are few formal requirements for someone who wishes to start up business as a sole proprietor.
Before commencing activities, most municipalities will require a business license which can usually be obtained in a matter of days at relatively little cost. The sole proprietor will also be required to apply to the Canada Revenue Agency to obtain accounts for GST, tax deductions and payroll remittances (i.e. a business number).
Any profit, or loss, from the business is attributed entirely to the sole proprietor, and is taxed accordingly in the sole proprietors’ hands.
If the business is to be operated under a trade name, it is highly recommended, but not required, that a formal Trade Name Declaration be filed at the Alberta Corporate Registry. Filing of a Trade Name Declaration gives the sole proprietor the right to use a Trade Name and prevents others from using the same, or a similar, business name. Many banks will require that a Trade Name Declaration be filed in order to operate a bank account using a Trade Name. Trade Name Declarations can be filed at any Registry location, or at Cameron Horne Law Office.
CAMERON HORNE LAW OFFICE has extensive experience advising small business owners with respect to their company’s structure, liabilities and annual maintenance requirements. We would be pleased to discuss your particular needs with you, in a professional and relaxed environment. Please call Cameron Horne Law Office for a quotation for our services and to arrange an appointment to discuss your needs.