A sole proprietorship is an unincorporated business that is owned by one individual exclusively. It is the simplest form of business structure there is.
The owner of a sole proprietorship has sole responsibility for making decisions, receives all the profits, claims all losses, and does not have separate legal status from the business. If you are a sole proprietor, you also assume all the risks of the business.
The risks extend even to your personal property and assets.
If you are a sole proprietor, you pay personal income tax on the net income generated by your business.
You may choose to register a business name or operate under your own name or both.
If you operate as an individual, just bill your customers or clients in your own name. If you operate under a registered business name, bill your clients and customers in the business's name. If your business has a name other than your own, you'll need a separate bank account to process cheques payable to your business.
A sole proprietor pays taxes by reporting income (or loss) on a T1 income tax and benefit return.
If you are a sole proprietor, you or your authorized representative have to file a T1 return if you:
You also need to file a return if you are claiming an income tax refund, a refundable tax credit, a GST/HST credit, or the Canada Child Benefit. You should also file a return if you are entitled to receive provincial tax credits.
The list above does not include every situation where you may have to file. If you are not sure whether you have to file, call CRA on 1-800-959-5525.
Click on the Sole Proprietor Button below to begin the registration application process.
