What is a sole proprietorship or sole trader

What is a sole proprietorship?

A sole proprietorship is a classification of business ownership.  A sole proprietorship is a small business that is owned and operated by one individual. It is typically a business that is run out of the home, with few assets, or liabilities.

To start a sole proprietorship business is not difficult or costly. In Alberta, Canada you would need to pay a small fee of around $100 to register your business with the Provincial Government.  This can be done at your local registry office.  Make sure you choose a name for your business before going in and have a few names to choose from as they will do a name search to insure no one else is operating a business under the name you want.

There are some things to consider before choosing to start a business as a sole proprietor. They are:

  1. Will you be the one and only employee of the business? If you think you will need employees you may start as a sole proprietor and change into a corporation later.
  2. How much income do you think your business will produce in a year? If it will be an amount over $30,000 you may wish to research corporations.
  3. If you will require to raise funds to start or continue your business, either through bank loans, or private capital, you may choose to be a corporation. As a sole proprietor in Alberta, Canada you would be personally responsible for any and all business debt.  So if things go sideways, your creditors have every right to come after your home, vehicles, or any other assets you personally own to get their investment back from you. This could be a scary possibility if you are starting a business that involves inventory, rent, vehicle payments, or any debt you would feel personally uncomfortable with repaying.

I have personal experience running a sole proprietorship business in my younger years when I owned and operated a candy business. This business classification worked for a few years until I decided to really grow the business and hired employees to work with me.  I then followed the advice of my accountant and incorporated the business. That allowed me to have WCB coverage for my employees, to remit income tax, CPP, and EI for my staff as well. It worked smoothly and I ended up selling the corporation for a profit.

I hope this answers some of the questions you may have had regarding sole proprietorship. Being a business owner is exciting, and sometimes challenging but I have always believed that I won’t work harder for someone else than I will for myself and my family.

A great opportunity for a sole proprietorship is Wealthy Affiliate. They will teach you how to start and grow a successful online business. There is a free introductory membership for you to have a look around.                                                    Please read my review of Wealthy Affiliate here. 

Good luck on your entrepreneurial adventure! I would love to know your thoughts and opinions. Leave me a comment.

4 thoughts on “What is a sole proprietorship or sole trader

  1. As a sole proprietor, are there any tax advantages? Or perhaps disadvantages? If I am a sole proprietor what kinds of deductions, can I make? Can I claim my car payments, if I work from home? Can I claim my mortgage as a deduction, since I am working from home?

    1. As far as Alberta is concerned you have tax advantages. You are able to claim household bills in the same percentage as what the business uses. ie If the business uses an office and garage and the sq footage is 25% of your home size you are able to claim 25% of all related bills. property tax, utilities etc. Disadvantage is you could be sued

  2. Great information about being a sole proprietor. So important that people understand their liability as a sole proprietor. No matter how small your business is, it just takes one person to take down everything you’ve worked for. What kind of protection do you get from an LLC?

    1. Hello. An LLC provides very limited liability to its owner/owners. It is not a corporation but basically a form of “Sole Proprietorship”

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