One of the first decisions that you will have to make when you are registering your Alberta company is whether you want to register as a Trade Name (also known as a Sole Proprietor) or an Incorporated Company.
What is a Trade Name (Sole Proprietorship)?
Simply put, a Trade Name exists when a business is owned and operated by one individual/entity who is conducting business using a business name which does not belong to him/her/it. When an individual or an entity operates as a Trade Name, there is no legal distinction between the owner and the business.
Advantages of a Trade Name
- very simple business structure with low start up costs (just $52.50 with GST)
- no annual maintenance (i.e. Alberta Corporate Registry annual returns)
- the registered owner has complete control over decision-making and receives all profits, since there are no directors or shareholders
- depending upon your situation, this type of business structure could be more beneficial from a tax standpoint. You should ask your Lawyer or Accountant.
Disadvantages of a Trade Name
- businesses operating as a Trade Name cannot protect their company name
- it may be more difficult to raise funds as you cannot issue shares or dividends
- the Trade Name cannot be sold or transferred to another owner
- the registered owner has unlimited personal liability
What is an Limited Corporation?
An incorporation is a legal entity which is created for the purpose of carrying on business.
Advantages of a Corporation
- The Corporate name can be protected (NUANS Report must be done before incorporation)
- Shareholders have limited personal liability
- The Corporation can be sold in part or in full through share purchase
- The corporation is a legal entity with rights, responsibilities and protections similar to an individual (person)
- If additional capital is required, funds can be raised by issuing shares
Disadvantages of a Corporation
- Set up costs are higher ($379 plus GST for the incorporation plus $45 for a NUANS Report if required)
- Increased government regulation
- Annual maintenance costs (Annual Return)
Our CORES Level III staff are qualified to give general information about Corporate Registry in the Province of Alberta. However, we are not lawyers or accountants. For advice specific to your situation, we recommend that you seek legal or financial advice from a lawyer or accountant.