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LLC or Sole Proprietorship

There are many benefits to having an LLC company for your business.
First off, I’m not a lawyer and you should consult a lawyer in your local area to find out all the pros and cons of having an LLC business.

It was not even a question for our Structural Engineering firm to start with a LTD (limited company in Canada). The benefits outwayed the challenges to having a LLC.

The LLC exists as a separate entity from any of the shareholders of the business. So, other than (in Canada) the Taxman who can get what they are owed regardless, the company is liable instead of the shareholders for any claims against it whether it be general comprehensive liability (someone drives the company car and injures another) or errors and omission liability for any errors done in the commission of the work. Of course, as a business (whether sole proprietorship or LLC) you should have general comprehensive liability and errors and omissions liability so this way the claim is against the company and any liability claims are against the company rather than you personally.

As well in order to have a business bank account for more than one person to have access to as shareholders it is best to have an LLC entity. Of course, you have to make sure you need two signatures of shareholders on cheques so there isn’t any possibility of improprierty by one of the shareholders.
You will need to “create” the LLC documents with the rules of the company and shareholders etc. but there are plenty of free LLC agreements you can see if they work for your business.

As a LLC, you can probably also write off many expenses to the company and our accountant can do many things like carrying over liabilities to the next year and he is worth the investment to do the end of year taxes as LLC have many write-offs that a sole proprietor does not have in business.

For the future, you can sell the business to another person much easier if you retire as the company is separate from your personal assets and liabilities.

One or more persons can be employees of the company with the tax advantages of being employees to get money out of the LLC company. Of course, you could still be independent consultants and bill the company for your services.

LLC company has so many advantages that once you get beyond a certain revenue that you personally claim on your personal income tax, everyone who is in business should have a LLC as a consultant for the benefits and write-offs. However, once again, I will say I am not a lawyer so you should consult one in your local area. Our structural engineering firm has been a LTD (LLC) since 1992 and the company has been healthy in its growth and it provides us with salaries take home as employees as well as a hired bookkeeper.

For more on starting a home business you can check out Members | The Business of At Home Business  for anyone interested in being in business!

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