Forms of Business Organization

Summary

1.        Sole proprietorships;

2.        Partnerships;

3.        Corporations; and

4.        Co-operatives.

A brief description of each type is followed by a summary of their advantages and disadvantages.  For specific information on how or where to register or incorporate a business, contact:

Saskatchewan Justice, Corporations Branch
2nd floor, 1871 Smith Street, Regina, SK   S4P 2N5
Phone: 306-787-2962   Fax: 306-787-8999
Email: corporations@justice.gov.sk.ca

To access required forms, visit their  Corporations  Web site.

1.  Sole Proprietorships

This is the simplest way to set up a business.  A sole proprietor is fully responsible for all debts and obligations related to his or her business.  A creditor with a claim against a sole proprietor has a right against all of his or her assets, whether business or personal.  This is known as unlimited liability.

This type of business comes under provincial jurisdiction.  If the proprietor chooses to carry on a business under a name other than his/her own, he/she must register with the province.  Registration, or renewal of registration, expires after three years.  

If a sole proprietor establishes a business in his/her own name, without adding any other words, it is not necessary to register the business.

2.  Partnerships

A partnership is an agreement in which two or more persons combine their resources in a business.  In order to establish the terms of the business and to protect partners/shareholders in the event of disagreement or dissolution of the business, a partnership/shareholders agreement should be drawn up with the assistance of a lawyer.  Partners share in the profits according to the terms of their agreement.

General Partnership
All members share the management of the business and each is personally liable for all the debts and obligations of the business.  This means that each partner is responsible for and must assume the consequences of the actions of the other partner(s).

Limited Partnership
Some members are general partners who control and manage the business and may be entitled to a greater share of the profits, while other partners are limited and contribute only capital.  Limited partners take no part in control or management and are liable for debts to a specified extent only.  A legal document, outlining specific requirements, must be drawn up for a limited partnership.

All partnerships must be registered with the province of Saskatchewan.

3.  Corporations

A corporation is a legal entity that is separate from its owners, the shareholders.  No shareholder of a corporation is personally liable for the debts, obligations or acts of the corporation.  This type of business can be incorporated at either the federal or provincial level.

A corporation is identified by the terms "Limited", "Ltd.,", "Incorporated", "Inc.", "Corporation", or "Corp.".  Whatever the term, it must appear with the corporate name on all documents, stationery, and so on, as it appears on the incorporation document.

Private Corporation
A private corporation can be formed by one or more people.  A majority of its directors must be Canadian residents.  If none of the directors reside in Saskatchewan the corporation must appoint a Power of Attorney who reside in Saskatchewan.  A private corporation cannot sell shares or securities to the general public.

Public Corporation
A "public corporation" is one that issues securities for public distribution.  Besides filing incorporation documents, a public corporation must file a prospectus with the Saskatchewan Securities Commission, must employ outside auditors, and, must distribute semi-annual financial statements.

Federal Corporations
Private and public corporations may be incorporated federally under the Canada Corporations Act.  A firm operating nationally or in several provinces may find this advantageous.  A federally incorporated business must still register in each province in which it does business.

Information and incorporation documents are available from:

Industry Canada, Corporations Canada
365 Laurier Avenue West, Ottawa ON   K1A 0C8
Phone: 1-866-333-5556 Fax: 613-941-0601
Web site:  Where to start

4.  Co-operatives

A co-operative is a corporation organized and controlled by its members, who pool resources to provide themselves and their patrons with goods, services, or other benefits.  A co-operative business structure provides:

• democratic control based on one member one vote
• open and voluntary membership
• patronage dividends

A co-operative is identified by the use of the words 'Co-operative', 'Limited', or 'Ltd.', which must be included with the corporate name in all business transactions.  Co-operatives are categorized under three different acts:  

• The Co-operative Act 1996 consists of provincial legislation that applies to all co-operatives in Saskatchewan, with exception to new generation co-operatives;
• The Canada Co-operative Act provides for federal incorporation of co-operatives operating in at least two jurisdictions.  These particular co-operatives must register under The Co-operative Act 1996;
• The New Generation Co-operative Act restricts the business of the co-operative to one or more of the following endeavours or businesses:
  (A)  the production, processing, or marketing of agricultural products;
  (B)  the provision of services to persons primarily engaged in an endeavour mentioned in section (A).

ADVANTAGES AND DISADVANTAGES OF EACH FORM OF BUSINESS ORGANIZATION

CO-OPERATIVES

Prepared by: Saskatchewan Regional Economic and Co-operative Development