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Sole Proprietorship, Partnership, or Corporation?

Posted on November 25 2015 | Author: Admin

Organizing a new business can be challenging as entrepreneurs are faced with many options on how to start their business. Choosing whether to establish  a sole proprietorship, partnership, or corporation is a common challenge for start-ups. The decision can have a significant impact on the business management of risks and tax exposure.

It’s important to first understand the different types of business structures. This will help entrepreneurs select the most appropriate structure for their business needs.

Sole Proprietorship
A sole proprietorship represents the situation in which an individual holds all the legal rights and responsibilities of their business activities. As such, the owner personally assumes the risks of the business activities including legal action and tax liability. The owner is responsible to declare business net income or losses as part of their personal tax reporting. For a start-up business, personal income tax rates can be higher than small corporation tax rates but start-up business losses can be offset against the owner’s other income. And legally, since there is no distinction made between the business and the owner, the owner’s personal assets are at risk if the business is not successful.

Partnership
A partnership is similar to a sole proprietorship for legal and tax purposes, except that the business’ net income/losses, liabilities, and management decisions are shared between two or more individuals. Its similarity to a sole proprietorship model makes it relatively easy and inexpensive for business to start-up and operate.  Because liabilities and taxes are shared between the partners, it is considered less risky for entrepreneurs. But this also means that the partners share in management decisions, and can therefore create difficulties if the partners do not have the same vision.

Corporation
A corporation is recognized by law as a single entity, or in other words, recognized legally as a person.  This takes much of the risk away from the owner's personal liability, as the company itself is now responsible for its debts and taxes.  While incorporating can reduce personal risks and taxes for the owner, it is more expensive to set-up and administer.  

There are different types of corporations that can either be private or public type corporations.  Private corporations are most commonly used among start-ups and owned by few shareholders, including the founders.  Public corporations sell shares of the company to the public through listings in stock exchanges. Listing through a public stock exchange makes it easier to access the financial markets by selling “shares” in the company. However, filing and reporting requirements for a public corporation can be considerable and expensive, whereas privately held corporations do not have the same disclosure requirements.

When starting a business, knowing the advantages/disadvantages of the different types of organizations (sole proprietorship, partnerships and corporations) can make choosing the right one an easier task. The entrepreneur's own situation and initial business prospects will be important criteria to the type of structure selected. The legal structure of a business is an important decision and should be based on the entrepreneur's budget, revenue, profits, expenses, size, and industry.

The most common business structure for a start-up is a sole proprietorship, which makes up 73% of all new small businesses (the rest being partnerships and corporations). Many start-ups are on a tight budget and may not be able to afford the costs and management requirements of a partnership or corporation.

Philippe Piche
Program Assistant

References: http://www.canadabusiness.ca/eng/page/2853/
Photo Credit: pixabay.com 






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Are You Fit to Fly in the Field?

Posted on November 19 2015 | Author: Doug Knox

The proliferation of UAVs or Drones for both recreational and business usage is presenting some potentially difficult regulatory conditions to navigate. AAFC published a short note in the Agri-info Newsletter in May 2015.

You may need permission to fly.

You are responsible for flying your aircraft safely and legally. If you are using a UAV to support your agricultural operations, you may need to apply for a Transport Canada Special Flight Operations Certificate (SFOC). The process allows experts to review your specific situation and determine if extra precautions are needed.

If your unmanned aircraft weighs less than 25 kg, you may qualify for an exemption that would allow you to fly without a SFOC.

Agriculture Agri-Food Canada, Agri-info Newsletter, May 2015

I have supplemented the information with a slightly broader survey of the issues and risks of ignoring the regulatory scene.

IT World Canada addresses the regulations and provided some resources for UAV operations.

Transport Canada has published the current status and requirements for UAV flying.

Transport Canada Infographic for a quick assessment of how the regulations apply.

The Canadian Bar Association comments on the need for legal understanding of the UAV usage.

Legal firm, Fasken Martineau provides an overview of the regulations and their application.

Doug Knox
Vice-President, Technology

Photo Credit: Flickr

 






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Handling Consumer Mistrust

Posted on November 12 2015 | Author: Mary Dimou

Consumers are demanding transparency. The rise of the tech revolution has propagated a deluge of new information and new avenues to reach consumers. With advances in technology allowing information (of varying quality) to be readily available at a user’s fingertips, it’s no wonder that the nouveau consumer feels confident enough to make “informed” judgements on new innovation.

As an entrepreneur, your invention could be a revolutionary solution to assist in global issues such as the sustainability of our species or our environment. Inopportunely, this intended solution has the probability of intersecting with the plethora of great controversies in the life science sector, including genetic engineering (GE), genetic modified organisms (GMOs), vaccinations, animal welfare issues, antibiotics and many more.

For a select few businesses, providing transparency and reaching consumers will be an uphill battle. Although their numbers are few, the reality is some activists will seek to discredit your efforts irrespective of facts and evidence. Accepting early on that some of these individuals cannot be reached is essential. It will enable you to reallocate your efforts to the majority of consumers, the skeptics. Skeptics will seek your answers and should be viewed as an exceptional communications opportunity for your business. Immersion into the controversy will impact your business model. In this era, successful tech businesses must include appropriate education and communication efforts in their business planning.

The nature of this post is not to focus on any of the aforementioned controversial topics, but rather provide recommendations for educating and guiding your consumers through the labyrinth of available information.
 

 1.       Evaluating both viewpoints of the controversy carefully. Informing considering both polarized viewpoints increases your credibility to your audience. 
         
 2.       Collecting scientifically substantiated evidence. One of the greatest challenges that we are facing as an industry is the credibility of the knowledge being obtained. Recommend that your customers review various peer-reviewed articles, primary literature, as well as national government resources (.gov). Your role as an educator should also include assistance with the curation and dissemination of this information and translation of this knowledge to the general public.
         
 3.       Communicating in a palatable way. Consumers require easily digestible information. This knowledge transfer can often require creativity on your part. You may try providing examples that are relatable to their day-to-day life, in an easily understandable format such as an infographic or cartoon. For example, the recent statement regarding glyphosate as a carcinogen was based on the risk and hazard scale by WHO’s International Agency for Research on Cancer. Although glyphosate carries a carcinogenic risk, the associated hazard of glyphosate causing cancer is minimal (1). In fact, the amount of glyphosate required to produce these carcinogenic effects would be enormous! A similar day-to-day example could use driving. Driving is an inherent risk; however, driving in a snowstorm is an increased hazard.


Managing consumer mistrust is an essential task that has been under prioritized by tech businesses, especially in the Ag sector. Although potentially daunting and difficult, engaging and educating consumers has now become an integral function of any successful technology business. So get an early start!

 

Mary Dimou, M.Sc.
Sr. Analyst, Regulatory Affairs & Sustainability

Reference:
(1) http://www.iarc.fr/en/media-centre/iarcnews/pdf/MonographVolume112.pdf  
Photo Credit: freedigitalphotos






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