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The Chef Alliance
BY: CHEF SONIA, SUCCESS MANAGER AT THE CHEF ALLIANCE, DATE: NOVEMBER 2019
Starting a Food-Related business - What to Consider When Deciding How to Set Up the Business
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)?"
SOLE PROPRIETORSHIP
The positives:
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.
The negatives:
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
The positives:
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.
The negatives:
It is more expensive to set up a LLC and there may be added tax filing costs each year.