Choosing the legal form of a business is often one of the first steps in starting a company. It is a critical decision, as it will have a significant impact on the business’s legal status, liabilities, and tax obligations. In this guide, we explain the different legal forms of businesses in Quebec and their main characteristics. Then, we share our best tips to help you choose the right business structure.
There are more than a dozen legal forms of businesses in Quebec. Each of them has its own legal status, advantages and disadvantages, requirements, and tax obligations. Here is more information about each of these legal forms.
A sole proprietorship is a business operated by a single individual, often referred to as a self-employed worker or freelancer. The business does not have a distinct legal status from its owner. Therefore, you are personally liable for the debts and obligations of the business. Additionally, you can choose a name other than your personal name to identify your business. This is the simplest and most common form of business.
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A corporation, also known as a legal person or a company, is a distinct legal entity. What sets it apart is that it has specific rights and obligations, determined by the Business Corporations Act. Profits are distributed among shareholders.
A general partnership (S.E.N.C.) relies on the participation and personal responsibility of each partner. Under a collective name, two or more people can operate such a partnership. This is why we see professional firms such as lawyers, notaries and dentists displaying a banner composed of the name of each partner. Since it has its own registered office and name, it can also take legal action (be sued or sue another entity).
A limited partnership (S.E.C.) consists primarily of one or more general partners and one or more limited partners. The latter are required to contribute to the common funds of the partnership. It must propose a common name for the partners. The general partners manage and represent the company. They provide the expertise needed to keep the organization running. For their part, limited partners provide capital in the form of money or goods. In addition, this contribution determines their liability for the company’s debts.
The joint venture is made up of partners acting in their own name, on behalf of all. This legal form is not considered a legal entity. In other words, it has no legal personality. In Quebec, if you are an unregistered general or limited partnership, then you are considered a joint venture.
A not-for-profit legal entity is a group of people who carry out activities on a not-for-profit basis. Rather, it carries out its activities for cultural, social, educational, philanthropic, religious, scientific, artistic or other purposes. No profits may be distributed among its members, and it must set up a board of directors whose members are elected by the organization’s members.
A cooperative comprises companies or individuals with a common economic, social or cultural interest. They join forces to run a business. The cooperative is a legal entity distinct from its members.
Now that we’ve covered the most common legal forms, here’s a look at some of the other forms that exist:
The right choice of legal form for your business depends on a number of factors. These factors vary greatly from one entity to another. That’s why choosing the right legal form requires careful consideration. In such cases, you may wish to enlist the help of a professional, such as a legal advisor or accountant, to guide you in the right direction.
Here are the main points to consider:
The procedure for registering a company at Quebec is fairly straightforward. Among other things, it aims to consolidate information on companies and individuals doing business in Quebec in the Registraire des entreprises du Quebec (REQ). Once your company’s registration is complete, the REQ will assign you a Quebec business number (NEQ), which you can use to identify yourself. Find out more:
To improve your company’s efficiency and financial management, you can compare and take out a business credit card. These offer several advantages, including improved cash flow management, separation of business and personal expenses, and the ability to earn points and rewards. Here are the most frequently recommended business credit cards:
But there are many others. To make your search for business credit cards easier, consult our guide to the best credit card offers in Canada and our credit card comparator. Tip: select the “SME” search field to see only the selection of cards dedicated to entrepreneurs.
Choosing the legal form of your business is crucial, as it will have an impact on your company’s legal status, responsibilities and tax obligations. This guide presents the main legal forms of business in Quebec, but don’t hesitate to consult a professional, such as a legal advisor or accountant.
The most common legal forms of business in Quebec are: sole proprietorship, corporation (company), general partnership (S.E.N.C.), limited partnership (S.E.C.), joint venture, non-profit organization, and cooperative.
This is the legal form your company takes to operate, manage and administer its business and make a profit. It largely determines the owners’ liability, tax and legal obligations, and other important aspects of its operation.
Choosing the right legal form for your business is essential, but it depends on a number of factors. These vary greatly from one entity to another, so consult our guide or a professional to make an informed choice.
Log on to “My Office” at the Registraire des entreprises or consult the company register.
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