Starting a Business: Part 2 of 6 - The Advantages and Disadvantages of Unincorporated Businesses

Starting a business involves many difficult but important choices, one of which is the type of business structure. As we presented in our last blog post, there are a number of business structures you can choose from, including an unincorporated sole proprietorship, an unincorporated partnership, a corporation or a co-operative. In this post we examine the advantages and disadvantages to unincorporated sole proprietorships and partnerships.

Pros and Cons of Incorporating a Business

The Advantages and Disadvantages of an Unincorporated Sole Proprietorship

An unincorporated sole proprietorship is the easiest type of business to set up and as such it is typically the cheapest. If you choose to use a business name then you do need to register it with the provincial government, but apart from that you can start doing business whenever you want.

Another advantage of an unincorporated sole proprietorship is that you get to make all of the decisions in what you’re doing. You don’t have to worry about getting anyone else to go along with what you want to do – you’re it!

The disadvantage to a sole proprietorship is that you’re a one-person show so you have to be everything to your business. You have to be the sales and marketing, you have to take care of the books, you have to deliver the products and/or services that you sell. Being the only person in your business can be very busy and you have to master a lot of skills which is why it’s a good idea to seek outside help from professionals like a bookkeeper, accountant and lawyer.

Also, when setting up as a sole proprietor, there is no separation between you and your company so if your business gets into financial trouble then lenders can go after your personal assets like your home, your car and your retirement savings.

The Advantages and Disadvantages of an Unincorporated Partnership

An unincorporated partnership shares many of the same benefits of a sole proprietorship in that the startup is easy and beyond registering a name (which is required when forming a partnership) there are no other formalities required.

Having two or more people in a partnership is an advantage because you have multiple people with the same level of commitment to the success of the business, multiple sets of skills, and if the business needs it, multiple people to sign for business loans to acquire financing. Also, since the partners report the income of the business on their personal tax returns, there are ways to split the income of the business to the overall benefit of the partners.

Having more people involved at the ownership level of a partnership means that you might have people who are more familiar with invoicing your customers, collecting payment, paying suppliers and remitting the appropriate taxes, but it still might be worthwhile engaging a bookkeeper, accountant and lawyer to make sure that your partnership is in full compliance.

On the flip side, being part of a partnership means a person does not have the autonomy to run the business exactly as they want – they have to make sure they’re on the same page as their partner(s). Like a sole proprietorship, there is no separation between the personal assets of the partners and the business, and even if one partner makes mistakes in the business all partners are equally liable.


Unincorporated sole proprietorships and partnerships are generally the easiest types of businesses to set up and maintain, but they do have the disadvantage of not being separate legal entities from the people who own and run them. Sole proprietors and unincorporated business partners often have to wear many hats and might not have the skills necessary to efficiently run a business so it is a good idea to engage outside help from a lawyer, accountant and bookkeeper.

This series of blog posts examines the process of starting up a business. Check back for the next installment and we’ll look at the advantages and disadvantages of corporations and cooperatives.

Simply Bookkeeping1 provides professional bookkeeping services for freelancers, solopreneurs and owners of unincorporated and incorporated businesses. We customize our services based on your needs – we only see some of our clients a few hours a month but others we see on a more regular basis. Our services are reasonably priced and we tightly track the amount of time we spend working for you so you only pay for the services you get.

To learn more about us, please visit our website at or contact Michele Hyde by phone at (647) 668 – 9363 or by email at

Have Your Say

If you’re thinking of starting a new business but you’re not sure which structure is best for you, we’d love to hear from you. Tell us what’s on your mind and share your thoughts! Also, please share this article using the social media share buttons – chances are there are others out there wrestling with the same decisions!

#Incorporate #TypesofBusinesses #StartingaBusiness #GettingStarted #TipsandAdvice #Bookkeeping

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