Starting a new business in Toronto

[Pauls47]

Hi,
I'm working as a financial analyst in a business firm. At the weekend, I also participate in content writing with my friend working as a freelance writer. Now my friend plan to start a content marketing company for promoting his client digitally. What are the legal procedures to start a new business as I'm thinking of registering the company as a sole proprietorship? Later, when the business goes well, we plan to change to a partnership venture if needed. What do you guys think?

[LightingGuy]

Doubt this person still posts here, hope their venture is off to a good start though. That said this is a good conversation topic...

TLDR - don't incorporate until it becomes too risky to NOT be incorporated, however at the same time be very aware of ALL the risks involved in your business that you can get sued for. There are a lot more things that can go wrong than you think.

The main value of incorporation for small businesses is that it puts a wall between your personal assets and your business. So if you screw up and someone sues your business, they can't go after your personal assets (there are some exceptions to this that a lawyer and accountant can walk you through).

People don't sue people who don't have money. So generally, if there's no sales yet, there's no point in incorporating. It costs more to incorporate, and tax returns are more complicated and expensive - at the start while you're bootstrappong every dollar spent is a dollar you don't get back.

However, as soon as you start making money, or even as soon as the actions you take in the goal of making money, can cost other people money, you should incorporate. Basically as soon as it becomes possible for there to be a target on your back - incorporate.

There are some exceptions to this: if you have a high personal net worth and are starting a business, incorporate right away. Adding "Inc." behind the business name tells the entire world that they can't go after your personal assets.

Also, from a professional standpoint, depending on what you do, have "Inc." or "Ltd." behind your company name can make it sound more professional.

Finally, this is what I did:
I waited as long as possible before the risk of NOT being incorporated became too high for me to bare. In my industry, which is construction, I don't get paid until the project is complete, which could be year after I start working on a project, however in the mean time money gets spent on the recommendations and quotes I deliver. So it made most sense for me to incoporate as soon as I started chasing business. I already knew exactly when I needed to be incorporate by though, so I ended up incorporating 3 months before the "deadline" since at the time I was setting up partnerships with vendors and it made my business seem a little more professional.

I know every business is different, and I actually know some solopreneurs who've always been sole-proprietors without any issues. But in my opinion you only need to get sued once in order to get wiped out.

What I like about being incorporated is it allows me to be more comfortable taking calculated risks, which is better for the long term growth of the company. And it gives me some tax flexibility as well.

[adbrush]

In order to clarify all the legal nuances, you need to use the advice of a legal consultant. Try to use the construction of a financial model. Business analysis is usually carried out in three directions – on operational, investment, and financial activities. Each direction describes its own objects of analysis. Additionally, the model can describe the external environment of an economic object. The complexity of these elements most fully describes the financial and economic activities of the enterprise. To do this, you can use Wall Street Prep Financial Modeling, the guys know their business for sure.

[charlimoun]

It's cool when you have experience in running a business and knowledge about marketing. I, for example, did not have such knowledge, so when I opened my own business, I made a lot of organizational mistakes that made my store lose money. In desperation, I turned to forums for help, where I was advised by one small business owner of some helpful resources with useful information. One of them is bizop btw if anyone is interested. It helped me a lot and now the business has begun to pay off.