Advice for what legal structure to use for your company
Not all businesses have the same legal structure – there are different types that are determined by a number of factors. You might choose to set up a corporation or a partnership; you could also be a sole proprietor. It all depends on how much revenue you are generating and what you plan to do with the profits.
You should carefully consider each type before deciding which one best suits you. For example, you may do business as a sole proprietor, working on a self-employed basis and invoicing under your own name. If this is the case, you might be able to offset some of your living expenses against tax.
However, this also means you could be held personally liable for any business-related obligations. If your business fails to pay a supplier, defaults on a debt or loses a lawsuit, the creditor could legally come after your house or other possessions.
With a limited liability corporation structure, it’s different. As the name suggests, the liability of the business is limited to the assets owned by the business, not you personally (though there may be exceptions in some circumstances).
An accountant can explain the legal business structures available in Canada and help you choose the one that best suits you.