Business Entities

What's the best way to carry on business?


Corporations are created in Canada, under federal or provincial statute. If the nature of the business falls wholly under the jurisdiction of either the federal or provincial government, that jurisdiction will have to be chosen for incorporation. If the jurisdiction is shared, then incorporation may take place under either federal or provincial statute.

Some corporations are specifically regulated and not only does the specific jurisdiction need to be considered, but the correct statute.

In Ontario, generally corporations, are created under the Business Corporations Act, Ontario ("OBDC") if the corporation is to have shareholders and be profit oriented. If the intention is to create a not-for-profit entity (e.g. a "charity") or a mining or insurance company then the Corporations Act, Ontario, ("OCA") would apply. 

Federally the Canada Business Corporations Act ("CBCA") governs corporations with shareholders and profit orientation and the Canada Corporations Act ("CCCA") covers corporations that fall outside of the CBCA, including not-for-profit corporations and special act corporations.

Once incorporated, a corporation is required to organize itself, this generally entails the issuing of shares to the prospective owners,  selecting the officers (president, secretary, treasurer etc.), selecting the directors and passing by-laws which might be likened to a "constitution" of the corporation.  The corporation is also required to keep certain records.


A franchise is a contractual arrangement between the franchisor who grants to the franchisee the use of a trade mark or trade name associated with a goods or services.  The franchisor maintains control over how the goods or services are delivered and retains an interest in the business of the franchisee.


A license is a contractual arrangement where the licensor grants to a licensee the right to use the property of the licensor, whether exclusively or not, but has little control over the licensee's business.

Joint Venture

A joint venture can have several different meanings. Sometimes it is equated to a partnership, other times to an association of two or more persons for some limited purpose without the participants becoming partners.  Generically it may refer to any combination of resources supplied by two or more persons in order to conduct a commercial venture under agreed rules.

Kinds of Business Entities

There are a number of legal arrangements that may be used to carry on commercial activity:  sole proprietorships, partnerships, limited partnerships, co-ownership, corporations (profit and non-profit), franchises, licenses, and joint ventures. Each has it advantages and disadvantages.

Sole Proprietorship

A sole proprietorship exists whenever an individual carries on business for his/her own account, without using any other business form and without the involvement of any other individuals, other than employees. The sole proprietor receives all the benefits but takes all of the risks of the business, which can imperil all of his/her assets (house, savings etc.)  Insurance can be purchased to limit this potential liability.


A partnership is formed when two or more individuals or corporations carry on business together with the purpose of making a profit. In Ontario, partnerships may be general partnerships or limited partnerships.


Co-ownership occurs when two or more persons own property jointly. Each person can deal with his/her interest in the property separately from the other person(s) unless restricted by contract with the other co-owner(s).