Corporation or Sole Proprietorship?


Hi! Thanks for visiting my blog!

If you are thinking about starting a small business, I’m here to help! Apart from the fun stuff like choosing a name, slogan and designing a logo, you should be thinking about how you want to set your business up. You can set your business up as a proprietorship, partnership, or a corporation. A proprietorship is a type of business owned and run by one person and there is no legal separation between the person and the business. A partnership is pretty much the same, except that it is run by two or more people and each person shares ownership and ownership responsibilities equally. A corporation is a separate legal entity, meaning it is separate from the person who created it. There are pros and cons to setting up your business as a proprietorship or a corporation which will be discussed below.

If you set up your business as a sole proprietorship, you are your business and your business is you. Some advantages of setting up your business as a sole proprietorship include;

  • cheap to set up
  • minimal regulations and filing requirements
  • all profits go directly to you

The negatives of operating your business as a proprietorship include;

  • you are personally responsible for debts accumulated by your business and claims can be made against your personal assets
  • income is taxable at your personal rate, possibly pushing you into a higher tax bracket
  • it can be difficult to raise capital on your own

Advantages of setting up your business as a corporation include;

  • limited liability- you are not responsible for the debt obligations of your company
  • your business will have a continuous life- it will continue to exist after you pass away and ownership of the business can be transferred to someone else
  • possible tax advantages- corporations are taxed at a lower tax rate than personal taxes

Disadvantages of setting up your business as a corporations include

  • closely regulated
  • costly to set up
  • corporate records need to be filed with the government annually

I hope this little blog post helped! My next post will detail the steps required to set up a proprietorship and a corporation so be sure to stop by again soon!

If you have any questions about starting a small business, or any accounting questions please feel free to contact me at or stop by my website



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