A business is usually defined as an entity or organization engaging in business, commercial, or professional activities designed to meet the economic needs of society. Businesses may be either for-profit or non-profit entities that conduct business to meet a social objective or further a religious purpose. A business may be a sole proprietorship, partnership, corporation, business structure, system, or combination of one or more such entities. In Canada, there are seven categories of business organizations recognized by the Canadian Business Registry.
There are two main types of business entities recognized by the Canadian Business Registry. One type is a sole proprietorship, also referred to as a DBA. A sole proprietorship is a sole company with no partners. Other types of business structures recognized in the Canadian Business Registry include partnerships, general partnershipships, limited liability partnerships (LLPs), corporations, partnerships, partnershipships, proprietor-active share (PAAS), and proprietorship.
A partnership is another common form of business structure recognized in the Canadian Business Registry. A partnership is formed between two or more people who share in the liability of a business. Partnerships may have one member, many members, or no members. In some cases, there are separate shares among the business debts of the partners.
Another common form of business structure recognized in the Canadian Business Registry is a corporation. A corporation is a separate legal entity from its shareholders. The Board of Directors of the corporation controls the day to day operation of the business and ensures compliance with various federal and provincial laws. A corporation requires registered agents to act on behalf of the corporation.
Formal business organizations, otherwise known as LPs, incorporate their own business, provide management services, and carry out specific contracts. Examples of formal business organizations include Limited Liability Company (LLC), Corporation (CP) and Partnership (PP) Limited Liability Company (LLP). Limited Liability Company (LLC) allows business owners to limit personal liability and corporation benefits while Partnerships allow business owners to participate in the partnership and jointly manage their business. PPOs are similar to LLCs but their contract provisions include more flexible reporting periods and periodic dividends.
Limited Liability Company (LLC) is different from a partnership or corporation in that it is incorporated as a separate legal entity from the individuals or business entity conducting the business. As with a sole proprietorship, if one of the partners is convicted of an offence carrying a penalty of imprisonment, the partnership is then immediately dissolved and all assets of the partnership are transferred to the individual who is convicted. An individual may also transfer business assets to an individual in preparation for incorporation. However, this transfer must be done after the effective date of the taxation laws for the business entity, which is generally six months after the year of incorporation. Income or profits made by the business are still taxable unless the profits are exempt.
One more important difference between sole proprietorships and business structures is that it is easier to establish a business in the UK if all of the partners are related through blood, marriage or adoption. However, sole proprietorships and partnerships require that at least one partner should have a business background or be able to do the running of the business on a day-to-day basis. Also, sole proprietorships have the advantage of providing the opportunity to start a business and be the owner of it immediately. This can be convenient for those wishing to get into business without delay.
Business structure also has a strong bearing on the ability of a business to recover losses and increase profits. Each partner in a business will make his/her own contribution in managing the business. The company can only recover its debts if it is able to generate profits after deducting its debts from its profits. This means that the business may not be able to pay debts and incur further debts unless it increases its profits. A partnership may have a lower level of profits and larger level of debts as compared to sole proprietorship. Therefore, the performance of a business can be determined by comparing its profit and its income before paying debts and profits after deducting its debts.