BY: CHEF SONIA, SUCCESS MANAGER AT THE CHEF ALLIANCE, DATE: NOVEMBER 2019
Many start-up businesses ask our Success Managers "What is the best way to set up my business - a Sole Proprietorship or a Limited Liability Company (LLC)?"
It's the easiest and cheapest way to start a business - you simply register it and away you go! This makes it appealing, especially for small businesses, since YOU are, essentially, the business.
If you want to run the business under a name other than your own, then you register the name as a “Doing Business As” (or DBA) or "Operating As" (or O/A).
For tax purposes, you account for profits and losses on your personal tax returns, i.e. you don't need to file a business tax return.
A sole proprietor has zero liability protection. So, if someone gets sick from something that you cooked, you are personally liable and can be sued. Unless you have enough liability insurance to cover the award, all of your personal assets are on the line and could be lost if the claimant wins a lawsuit - that includes your home, your savings and car.
LIMITED LIABILITY COMPANY
Operating as a LLC shelters your personal assets from liability. In the example of a possible lawsuit, a claimant would only be able to recover money that the LLC had - not your personal assets.
You don't have to set up the LLC in your home province. If you are anticipating a successful business with high profits, you may want to consider registering it in a province with the lowest corporate tax rate. Remember, there will be added costs, such as paying annual fees to a local representative in that province, and other regulatory costs.
It is more expensive to set up a LLC and there may be added tax filing costs each year.
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NOTE: MEMBERS OF THE CHEF ALLIANCE ARE COVERED BY LIABILITY INSURANCE, WHICH IS INCLUDED IN THEIR MEMBERSHIP BENEFITS.
BACKGROUND: The Chef Alliance is a membership organisation for Personal Chefs, Private Chefs, Chefs and Caterers, Artisan and Cottage Industry food producers and bakers, Home Cooks, Culinary Instructors, Food Stylists, Chef Instructors and other foodservice professionals across Canada. We support our members in growing strong, successful businesses, through mentorship, peer support, marketing, business savings and liability insurance. We have member Chefs in Toronto, Mississauga, Hamilton, Burlington, Montreal, Quebec City, Vaughan, Markham, Ottawa, Vancouver, Victoria, Richmond, Calgary, Edmonton, Regina, Halifax... and many other towns and cities in Canada.
DISCLAIMER: INFORMATION PROVIDED MAY BE INCOMPLETE. THIS ARTICLE SHOULD NOT BE CONSIDERED A SUBSTITUTE FOR PROFESSIONAL, LEGAL OR FINANCIAL ADVICE. EACH BUSINESS SITUATION IS UNIQUE AND THE ADVICE PROVIDED IS INTENDED TO BE GENERAL. PLEASE CONTACT A LEGAL OR FINANCIAL PROFESSIONAL FOR ADVICE THAT IS BEST SUITED FOR YOUR BUSINESS AND TO MEET THE REQUIREMENTS OF YOUR LOCAL/REGIONAL GOVERNMENT LAWS AND BY-LAWS.