What Are The Types Of Businesses In Canada?

What Are The Types Of Businesses In Canada?

It is essential to understand the different types of businesses in Canada before you start your first venture. If you conduct business without the proper documents and registrations in place, you could find yourself in trouble.

There are advantages and disadvantages to consider for each type of business structure. The nature of the business you wish to conduct will also be a factor in deciding which structure is best.

What Are The Types Of Businesses In Canada?

The different types of businesses in Canada.

The following breakdown of the types of businesses in Canada should give you a better idea of what to expect. It should also provide you with enough information to get you started with your own business.

Sole Proprietorships

A sole proprietorship is one of the easiest and least expensive types of businesses in Canada to set up. It is the perfect solution for self-employed individuals trading in their personal capacity. For example, this would be a suitable business structure for a freelancer working from home.

One disadvantage, however, is that the business and the individual are one and the same. That means that if your sole proprietorship incurs debt it cannot pay, you run the risk of having your personal assets repossessed.

There are, however, several advantages to owning and operating a sole proprietorship. One is that you are the sole decision-maker. Another is that all business expenses are being deducted from your account, lowering your taxable income.

A sole proprietorship does not require the business owner to open a separate business bank account. Nor does the owner need to register a business name, as the name will be that of the individual.

If the owner wishes to operate under another name, they need to register that name. Adding words such as “company” or “consulting” to the owner’s name would also require registration.

Once you have evaluated the types of businesses in Canada, you should take care when registering your business name. You must search to ensure that there is not already a business operating under that name. Using a company like Ownr to assist you with the registration process will help avoid any possible confusion or lawsuits.

What Are The Types Of Businesses In Canada?


Partnerships are like sole proprietorships, but they comprise two or more individuals working together. As is the case with a sole proprietorship, these individuals own all the assets associated with the business.

However, they are also responsible for any liabilities relating to the business. The business partners share this responsibility but are also each held fully accountable for the company. Therefore, these types of businesses in Canada are separate from the individuals acting as partners.

Like a sole proprietorship, the business usually operates under the exact names of the partners. If they wish to conduct business under a different name, they will have to register the business name.

A partnership could be beneficial because the workload, and the responsibility of the business, are shared between the partners. However, shared decision-making could result in conflict and may delay urgent decisions.

One must be careful when initiating a business partnership with others. No matter who they are, you never know what could transpire through the business relationship. For instance, your partners may incur debt without consulting you, for which you could be liable.

They may also decide to leave the business if unhappy, which would require some form of compensation, called a buy-out. It could be an expensive process and may cause a few problems for the business going forward.

Therefore, it is essential to draw up a contract when starting these types of businesses in Canada. Consulting a lawyer would be advisable to protect each partner in some way should things not work out.

There are two different types of partnerships. These are known as general partnerships and limited partnerships. Let us have a look at the differences between these two types of partnerships.

General Partnerships

This type of partnership operates as described above. Each partner in a general partnership is actively involved in the business and shares responsibility for everything related to the company. In other words, the partners manage and run the business themselves.

While there are no official filing requirements for a general partnership, there is Provincial legislation in place. That means that general partnerships must follow specific rules for these types of businesses in Canada.

It is, therefore, recommended that you seek legal advice when starting up a partnership of any kind.

What Are The Types Of Businesses In Canada?

Limited Partnerships

A limited partnership differs from a general partnership slightly. The partners would all still own the business’s assets, but they may have different roles and levels of liability.

This type of partnership most often comprises general partners who manage and operate the business. But they may also include limited partners who are associated with the company in a limited capacity. A limited partner’s role is to provided funding for the business.

Limited partners are not actively involved in running the business and have less responsibility concerning liability. They cannot be held liable for more than the value of their financial contribution.

One can transfer a limited partner’s interests. This transferral allows for some flexibility should one of the partners choose to leave.

Again, one should consult a lawyer when considering these types of businesses in Canada.


Corporations offer a slightly more complex business structure and are more expensive to set up. However, this type of business structure is essential for doing business with governments and other companies.

As the owner of a corporation, you would enjoy a great deal less liability than in a sole proprietorship or partnership. Here, the corporation is a separate entity from the individual who owns it. These types of businesses in Canada are viewed as individuals under the law and have the same legal rights.

There are specific lawful requirements associated with a corporation, and registration must occur through the proper channels. You would also need to set up a separate business bank account to receive and make payments.

The corporation comprises shares divided amongst the owners and shareholders. The shareholders, therefore, own the business and share the responsibility of operating and maintaining the business. However, you can be the sole shareholder and not have any partners in a corporation.

Corporations also offer their owners some tax advantages such as income splitting, tax deferral, and possible tax credits. There is also the possibility of a capital gains exemption should the business be sold.

With these types of businesses in Canada, you have the option of selling shares to potential shareholders. It is, therefore, slightly easier to obtain funding in exchange for equity if your business model makes for a good investment.

One can register both federally and provincially for these types of businesses in Canada. But the corporation must still obtain extra-provincial registrations for each province it operates in, irrespective.

A corporation will continue to exist even after its shareholders have passed on. Legal documentation must be completed and submitted to the registrar to close the business.

One of the disadvantages of owning a corporation is the administration and paperwork required regularly. For instance, you must employ the services of an accountant to file two to three business tax returns each year.

You also need to keep a minute book containing corporate bylaws, registers, and ledgers, as well as meeting minutes.

If you are unsure where to start, there are services available that can lead you through the entire process from start to finish. One such service is Ownr. They will help you register your business, draw up legal documents, open a business account, and provide an online minute book for your convenience.

What Are The Types Of Businesses In Canada?


A cooperative, also referred to as a co-op, is often listed as a type of business structure. However, for the most part, these types of businesses in Canada operate in the same way as corporations.

The primary difference is that the business is managed and operated by members who also use the products and services the co-op offers. You could, therefore, say that the members are both the owners and the customers of the business.

Co-ops exist in sectors that require specific products and services at the lowest cost possible to remain profitable. They, therefore, work together to provide the products and services they need to help them produce their end products for the market.

Co-ops are common in the agricultural sector, as an example.

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What we have learned about the different types of businesses in Canada.

Depending on the level and type of business you wish to conduct, there are a few options available to you.

Sole proprietorships and partnerships are the more straightforward and least expensive to set up. But there is unlimited liability attached for the owners of these businesses.

On the other hand, corporations come at a higher cost with a great deal of paperwork and legal requirements. However, their business is seen as an individual with the same legal rights, limiting liability for the owners.

Whichever business structure you choose to move forward with, it is always safest to consult an expert first. A proficient service, such as that provided by Ownr, will help you navigate the registration landscape. Employing a service such as this will ensure that you abide by your legal obligations as a business and avoid issues later.

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FAQs about The Types Of Businesses In Canada

What are the types of businesses in Canada?

It’s important to know the different types of businesses in Canada before you start your business venture. Types of business in Canada include: sole proprietorships, partnerships and corporations.

What is a sole proprietorship?

A sole proprietorship has one owner who receive their own profit from the business. It’s one of the easiest and less costly type of business in Canada, it’s suitable for self-employed people who want to trade in their personal capacity. An example of this would be a freelancer working from home.

What is a partnership in business?

A partnership is a business that is shared by two or more owners, it is similar to a sole proprietorship as the owners own of all of the associated with the business. The responsibilities and liabilities are shared by both partners which means whoever is in a partnership, will be held accountable for the company.

What is a corporation in business?

A corporation is an entity that is legal and are separated from its owners. It’s a more complex type of business and expensive to set up. Corporations is good for those wanting to do business with governments and other companies.

Which business is right for me?

It depends on your situation, for example a sole proprietorships is more simple and cost-efficient as you’re the only owner. If you want to be in a partnership, ensure you draw up a contract to protect each partner incase things don’t work out.


July 14, 2021
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