BC Business Structures Explained: Choosing the Right Setup

You're ready to launch your business in BC – but should you incorporate or start as a sole proprietor or partnership?  This single decision will impact your personal liability exposure, tax obligations, ability to raise capital, and even whether your business can outlive your involvement.

Choosing the right structure from the start can save thousands in restructuring costs later.  There are three primary business structures in British Columbia: Sole Proprietorships, Partnerships, and Corporations.  This article walks through the essential factors to help you make an informed choice aligned with your business goals.

Quick Comparison: BC Business Structures at a Glance

Factor	Sole Proprietorship	Partnership	BC Corporation
Setup Cost	Relatively Low	Medium-High	Medium-High
Personal Liability	Unlimited	Unlimited	Limited
Tax Treatment	Personal tax return	Personal tax return	Corporate tax return
Can Sell Business as a Whole	No, just the assets	No, just the assets	Yes (sell shares)
Annual Compliance	Minimal	Minimal	Annual reports & other resolutions required
Investor Appeal	Very Low	Low	High

Still unsure which is right for you?  Keep reading for detailed analysis of each factor.

Limited Liability: Protecting Your Personal Assets 

 

The single biggest difference between business structures is personal liability protection.

As a sole proprietor or general partner in BC, there's no legal separation between you and your business.  If your business is sued or goes into debt, creditors can seize your personal assets – your home, savings, vehicles, and investments.

Example: Sarah runs a consulting business from home as a sole proprietor.  When a client sues her business for alleged professional negligence seeking $500,000, her house and personal savings are at risk.  If she had incorporated, only her business assets would typically be exposed (assuming proper corporate formalities and no personal guarantees).

A BC corporation provides limited liability protection.  The corporation is a separate legal entity, meaning your personal assets generally remain protected from business debts and lawsuits.  This protection is especially critical for:

• Businesses with employees or contractors;

• Service-based businesses with professional liability exposure;

• Any business signing commercial leases or taking on significant debt; or

• High-growth ventures with elevated risk profiles.

Important caveat: Directors can still face personal liability for unpaid wages, source deductions, and GST/PST.  Personal guarantees on loans or leases also directors/shareholders to personal liability.

Tax Implications: Why Structure Matters

Your business structure significantly affects your tax obligations, though the specific implications depend on your individual circumstances.

Sole proprietorships and partnerships report business income on your personal tax return.  You'll pay personal income tax rates on all business profits, whether or not you actually withdraw the money from the business.

Corporations file separate corporate tax returns and may access small business tax rates.  Corporations also provide opportunities for tax deferral and income splitting (within legal limits), which can result in tax savings depending on your situation.

However, tax law is complex and constantly evolving.  The "best" structure from a tax perspective depends on numerous factors.  While we can help you understand the legal and liability differences, tax planning requires specialized expertise we don't provide.  We strongly recommend that you consult with a qualified accountant or tax advisor to model the tax implications of different structures based on your specific circumstances.  

Raising Capital: Which Structure Attracts Investors? 

If you're building a business seeking outside investment, your structure matters immensely.

Sole proprietorships and partnerships cannot issue shares or bring on equity investors.  Generally speaking, your only funding options are:

• Personal savings and assets;

• Bank loans or lines of credit (often requiring personal guarantees); and/or

• Family and friends lending you money personally.

BC corporations can raise capital through share sales, making them attractive to:

• Angel investors;

• Venture capital firms;

• Strategic partners; and/or

• Employees receiving equity compensation.

Example: A Vancouver startup seeking $500K from angel investors needs a corporation with proper share structure (often including, among other things, preferred shares with liquidation preferences and board seats).  Some investors won't write checks without certain corporate framework – it's non-negotiable.

Beyond institutional investors, corporations can also implement employee stock option plans (ESOPs) to attract and retain top talent – something impossible as a sole proprietor.

Selling Your Business: Why Structure Matters for Exit Planning 

Think beyond your launch – consider your exit strategy now.

Sole proprietorships and partnerships cannot be sold as businesses.  You can sell the assets (equipment, inventory, client lists), but the business registration, licenses, and permits cannot transfer.  The buyer must:

• Purchase the assets through an asset purchase agreement;

• Register a new business entity;

• Apply for fresh licenses and permits; and

• Reassign contracts individually.

BC corporations have the option of being sold through share sales, offering:

• A simpler transaction in principle;

• Easier transfer of contracts, licenses, and permits;

• Potential tax advantages (consult with a tax advisor about the Lifetime Capital Gains Exemption); and

• Greater appeal to strategic acquirers.

Even if you're not planning to sell, corporations facilitate succession planning.  Shares can be transferred to family members or key employees over time, ensuring business continuity when you retire.

Ownership and Control: Flexibility Matters

Sole proprietorships provide complete control – you make all decisions and keep all profits.  But you're also the only owner; you cannot bring on business partners or shareholders.

Partnerships require at least two people sharing ownership, profits, and decision-making authority.  Without a written partnership agreement (which we strongly recommend), BC's Partnership Act governs your relationship – and its default rules may not align with your intentions.

Corporations offer maximum flexibility.  You can:

• Be the sole shareholder and director (complete control);

• Bring on multiple shareholders with customized rights through share classes;

• Create voting and non-voting shares;

• Structure decision-making through shareholder agreements; and

• Add and remove shareholders as needed.

Compliance and Administrative Requirements 

Different structures entail varying administrative burdens.

Sole proprietorships have minimal ongoing requirements:

• Register your business name initially; and

• Maintain basic bookkeeping for tax purposes.

Partnerships have similar minimal requirements but should maintain a written partnership agreement which can be more complex outlining profit splits, decision-making authority, and exit provisions.

BC corporations have more substantial compliance obligations:

• File annual reports with BC Registry Services;

• Maintain corporate records (minute books, resolutions, share registers);

• Hold annual general meetings or prepare annual consent resolutions in lieu of a meeting;

• Keep financial statements (higher annual accounting costs); and

• Maintain registered and records office address in BC.

Weigh prospective costs against the potential tax savings and liability protection benefits (which you should discuss with your lawyer and accountant).

Which Structure Is Right for You? 

You may need a BC corporation if:

• You operate in a high-liability industry (food service, consulting, tech, construction etc.);

• You plan to raise outside investment or grant equity to employees;

• You have significant personal assets to protect;

• You're building a business you might eventually sell; and/or

• Your accountant confirms tax advantages in your situation.

A sole proprietorship might work if:

• You're testing a business idea with minimal revenue;

• You run a low-risk service business from home;

• You want absolute simplicity with minimal paperwork;

• You're comfortable with unlimited personal liability; and/or

• The administrative costs of a corporation outweigh the benefits.

Consider a partnership if:

• You have multiple co-founders sharing ownership;

• You don't need the complexity of a corporation yet; and

• You'll create a comprehensive written partnership agreement.

Important: Some BC businesses start as sole proprietorships to test the market, then incorporate once revenue grows or liability concerns increase.  You're not locked into your initial choice forever – but restructuring later can cost far more than getting it right from the start.

Professional Advice 

We strongly encourage you to consult with both a lawyer and an accountant before making your final decision.  As business lawyers, we can help you understand the legal implications – liability protection, ownership structures, succession planning, and compliance requirements.  An accountant can model the tax implications for your specific situation.  Together, these professionals ensure you make an informed choice that protects both your legal interests and your financial position.

The Takeaway

Choosing the right business structure involves weighing, among other things, liability protection, tax treatment, ownership flexibility, succession planning, and growth potential.  By carefully considering these factors – and where your business may be in 3-5 years, not just today – you can make an informed decision that supports your business's success and longevity. 

In most cases, if your BC business will involve any meaningful liability risk or you plan to grow significantly, incorporation provides compelling legal protections that justify the modest additional costs and administrative requirements.

Ready to Structure Your Business Properly?  Alex Robertson helps BC entrepreneurs choose and implement the right structure from day one.  He'll review your specific situation, explain your options in plain English, and handle all legal paperwork efficiently.  Please contact us at (604) 736-9791 or email Alex at ar@dwslaw.ca.

Disclaimer: This article is not intended to serve as, or should be construed as legal advice, and is only to provide general information. Should you require legal advice for your particular situation, please get in touch with us. The information for this article was compiled on January 27, 2026.