E D M O N T O N J O U R NA L e d m o n t o n j o u r n a l . c o m W E D N E s DAy, J U N E 2 5 , 2 0 1 4 B7

COMMUNITY QUESTION:

How do you know if you should incorporate or be a sole proprietor?Capital Ideas members offers insights on how to structure your business

Nikki Van Dusen of NikComm Inc. (nikcomm.ca) says that for her, the decision was easy. “Potential client: ‘We can pay you on contract if you’re incorporated, otherwise we put you on payroll.’ Me: ‘Decision made.’ ”

“Think five years ahead, not 20. We live in a growing and changing economy. If you provide a service to individuals and have little inventory, income or expenses, then stay a sole proprietor. If you want to eventually have staff, business growth or multiple income sources, then consider incorporation. Both have benefits, but be careful not to restrict growth.”— Dan Dromarsky of Enviro-Plus Business Services Corp. — enviro-plus.ca

“If you are making a profit of $30,000, then it is time to consider incorporating for the tax advantages. Those advantages should cover the extra cost of incorporating. Consult your accountant for advice on your personal situation… but liability should take precedence — you may want to consult a lawyer about liability issues.”— Les Grajkowski of Padgett Business Services Edmonton SE — padgettalberta.ca

“For a sole proprietor filing tax and GST returns and professional fees, costs are usually under $500. If you incorporate the cost jumps to $2,000 or higher. Depending on the income of your business, that might be a deciding factor.”— Kat Halushka of 365Marketing — 365marketing.ca

“I have done both; sole proprietorship is easier in some ways, but you leave your personal assets exposed. I’ve incorporated both my current businesses to separate my personal accounting from my business accounting. It’s important to have proper business insurance, too.”— Sue Heuman of Focus Communications — focuscom.ca

“If you are incurring expenses that you can’t write off personally but could via a business; when you want to hire employees; and when you are worried about risk management on a personal and professional basis, consider incorporating.”— Kevin MacDonald of PU Technologies Inc. — putechnologies.tk

“There are several advantages to incorporation, including a more tax-efficient structure and better liability protection. The decision would be based on a growth-projection assessment, whether your clients would prefer to deal with an incorporated entity, whether you will be seeking capital or bringing in shareholders or partners, etc. In most cases, it’s better to incorporate. Yes it’s a bit more expensive, but it’s worth it.”— Ashif Mawji of NPO Zero — npozero.com

“For small-pace business, it’s preferable to be sole proprietor, but liability and professional insurance should be made to cover the sole proprietor if something wrong happened. When sale revenue is above $100,000 per year, it is time to change into incorporation, as taxes will be roughly the same for sole proprietorship or incorporation. Besides, the incorporation will be a separate legal identity compared to the sole proprietor.”— Ahmed Mostafa Farag of Hingeneering

“It depends on the specific details of the business venture. Incorporate if you have completed a financial plan or other needs, such as setting up a bank account, getting insurance, securing clients or investors, etc. Examine your work in the context of the Canadian Revenue Agency’s rules, and be very careful as the CRA has audit focus on examining personal-service businesses. Get an accountant’s or lawyer’s advice, or risk penalties and a large audit.”— Elaine Parker of Analyisis360 — analysis360.ca

“Sole proprietorship means a simpler setup and taxes, and you can deduct losses from other income. You have no employees, so no T4’s are required, but you do not have limited liability. Incorporating means limited liability, but the accounting is more expensive.”— Lorn Stanners of Financially Speaking — financiallyspeaking.ca

“Incorporate if you have lots of personal assets, if there are major safety risks involved in doing your work, or if large corporations are your clients — many will not work with a sole proprietor. There may also be a natural transition point; start as a sole proprietor, and once your operation gets off the ground, level up and incorporate!”— Chris Vilcsak of Solution 105 Consulting Ltd. — solution105.com

“I think the answer comes down to an assessment of the degree of risk that the entrepreneur feels they may be exposed to, and then tax planning strategies that he or she may wish to exercise in the future. It’s a question that should likely be explored with your team of business advisers.”— Jim Ewing of Pro-Vision Solutions Inc. — linkedin.com/in/JimEwingProVision

“In general, there are two main areas to consider when choosing between a proprietorship and a corporation. First, is the nature of your business operation likely to generate substantial liability risk? If so, a corporation offers better protection for your personal assets. Second, is it likely that the business will generate more profit than you want or need to sustain your lifestyle? If yes, you could leave profits in a corporation at a potentially significant tax savings. These could be used to grow the business, invest or simply saved for later use.”— Jeremy Fearnley of Grant Thornton LLP — grantthornton.ca

You and your business can be featured here, too. Join the community at capitalideasedmonton.com

“There isn’t a better city to take a risk [than Edmonton]; everyone pushes you to do it. When they realize that Story Engine is doing well, they ask ‘How are you scaling?’ and ‘Now what?’ ... When you run into trouble, you can phone someone up for advice… In other cities I’ve lived in, people are a little more guarded and competitive.”— Todd Babiak, co-founder of Story Engine (storyengine.com)

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In the interest of helping those who are just begin-ning their entrepreneur-ial journeys, Wellington Holbrook, executive vice-president of ATB Business, is asking you to reflect on your path by telling us:

What do you wish you were told when starting a business?

You can answer the question in two ways:• Open today’s Capital Ideas email if you’re a mem-

ber, or• Visit capitalideasedmonton.com

We’ll publish the best answers, along with your busi-ness name and website address, on July 2.

For more insights on the entrepreneurial life, check out ATB’s latest Business Beat survey at atb.com/businessbeat.

CAPITAL QUESTION: What do you wish you were told when starting a business?

These answers are in response to a question posed by Capital Ideas member Nadine Riopel of Innovation Expedition. To pose a question of

your own to Capital Ideas’ expert community, visit capitalideasedmonton.com/ask.