Business formation

How BC law treats it

A sole proprietorship is the simplest form: one person carries on business, owns the assets and is personally liable for all debts. If the business uses a name other than the owner's own, it must register that name. A general partnership arises when two or more people carry on business together with a view to profit, and each partner is personally liable for the firm's debts. Partnerships register under the Partnership Act, RSBC 1996, c 348, which also governs limited partnerships and limited liability partnerships. A company is a separate legal person incorporated under the Business Corporations Act, SBC 2002, c 57 (BCBCA) by filing an incorporation application with the Registrar of Companies, usually after reserving a name. The company has articles, a notice of articles, at least one director, a central securities register and a transparency register of individuals with significant control. Shareholders are generally not liable for its debts beyond their investment. Businesses can also incorporate federally under the Canada Business Corporations Act and then register extraprovincially in BC. BC has no limited liability company. Other steps commonly follow: a business number and GST registration with the Canada Revenue Agency, PST registration with the province where required, municipal business licences, WorkSafeBC registration once workers are hired, and founder agreements covering shares, vesting and IP.

What it means for your business

The structure chosen at the start affects personal risk, how profits are taxed, how easily investors can come in and how cleanly the business can be sold or passed on. Many owners start as sole proprietors and incorporate once revenue or risk grows, which involves transferring assets and contracts. Choosing the right structure early, with tax advice, avoids costly reorganizations later. Example: Two Vancouver designers start working together without paperwork and unknowingly form a general partnership. Before signing their first large client contract, they incorporate a BC company, issue shares to each, sign a shareholder agreement and assign their design work to the company.

Risks and common mistakes

Starting a business with a partner without realizing a general partnership, with personal liability, already exists. Trying to form a US-style LLC, which does not exist in BC. Using a business name without registering or reserving it. Incorporating without founder share vesting, IP assignments or a shareholder agreement. Forgetting the transparency register and records office requirements after incorporation.