Understanding Business Structures in Alberta: Choosing the Right One for Your Business or Organization
Written by: Roshan Kalra
Starting a business or organization in Alberta requires careful planning, and one of the most critical decisions you’ll make is choosing the right business structure. The type of structure you select will impact legal liability, taxation, funding opportunities, and governance requirements.
Below, we outline the key differences between sole proprietorships, corporations, partnerships, limited liability partnerships, non-profits, and registered charities to help you make an informed decision.
1. Sole Proprietorship
A sole proprietorship is the simplest and most common form of business ownership. It is an unincorporated business owned and operated by one person.
Key Features:
· The business and owner are legally the same entity.
· The owner has full control over decision-making.
· Profits are taxed as personal income.
· The owner has unlimited personal liability, meaning personal assets (such as a house or car) can be used to pay business debts.
· Easiest to set up with minimal regulatory requirements.
Best for:
Freelancers, consultants, or small businesses with low risk and low operational complexity.
2. Corporation
A corporation is a separate legal entity from its owners (shareholders). This means it has its own rights, can enter contracts, own property, and is responsible for its own debts.
Key Features:
· Limited liability – Shareholders are not personally responsible for corporate debts beyond their investment in shares.
· Tax advantages – Corporations are taxed separately, and business owners can take advantage of tax deferrals and income splitting.
· Increased credibility – Many businesses and investors prefer to work with incorporated entities.
· More complex regulatory requirements, including annual filings and corporate governance rules.
Best for:
Businesses looking for growth, investment opportunities, and legal protection, such as tech startups, construction companies, and medium-to-large enterprises.
3. General Partnership (GP)
A general partnership is when two or more individuals share ownership of a business. It is similar to a sole proprietorship but involves multiple owners.
Key Features:
· Partners share profits, losses, and management duties.
· Each partner has unlimited personal liability for the business’s debts.
· Taxed as personal income for each partner.
· Flexible structure but requires a clear partnership agreement to outline roles, responsibilities, and profit-sharing.
Best for:
Small businesses where two or more individuals want to collaborate and share control, such as law firms, medical practices, or small retail shops.
4. Limited Partnership (LP)
A limited partnership is a variation of a general partnership but includes at least one general partner (who manages the business) and one or more limited partners (who invest capital but have no managerial role).
Key Features:
· General partners have unlimited liability, while limited partners are only liable up to their investment amount.
· Limited partners do not participate in management decisions.
· Often used for investment or real estate businesses.
Best for:
Businesses seeking passive investors who want to contribute capital without managing the company.
5. Limited Liability Partnership (LLP)
A limited liability partnership (LLP) is commonly used by professional firms (e.g., law firms, accounting firms) where partners require some liability protection.
Key Features:
· Each partner is protected from personal liability for the negligence or wrongdoing of other partners.
· Partners remain personally responsible for their own actions.
· Often regulated, meaning only certain professions (such as lawyers, accountants, and doctors) can form LLPs in Alberta.
Best for:
Professional service providers who need liability protection but want a partnership structure.
6. Co-operative (Co-op)
A co-operative (co-op) is a business owned and operated by its members, who share profits and decision-making.
Key Features:
· Democratic structure, with members voting on major decisions.
· Members benefit from the co-op’s success but do not have the same profit-driven motives as corporations.
· Common in agriculture, housing, and retail sectors.
Best for:
Groups of individuals or businesses that want to work collectively, such as farmers, housing associations, and independent retail groups.
7. Non-Profit Organization (NPO)
A non-profit organization (NPO) is formed to provide services or support to a cause rather than generate profits for owners or shareholders. Unlike corporations, NPOs do not distribute profits to members or directors.
Key Features:
· Operates for a specific purpose (e.g., education, arts, social services).
· No ownership – run by a board of directors.
· Exempt from income tax, but may still be required to pay GST and other business-related taxes.
· Can earn revenue (e.g., membership fees, program fees) but must reinvest all funds into its mission.
· Not automatically a registered charity (must apply separately if seeking charitable status).
Best for:
Organizations focused on community service, advocacy, or social good, such as cultural organizations, professional associations, and sports clubs.
8. Registered Charity
A registered charity is a type of non-profit organization that has been officially recognized by the Canada Revenue Agency (CRA) as meeting the requirements for charitable status.
Key Features:
· Must be dedicated to charitable purposes, such as relief of poverty, advancement of education, advancement of religion, or benefit to the community.
· Can issue tax receipts to donors, making donations tax-deductible.
· Subject to strict CRA regulations and reporting requirements.
· Required to devote resources exclusively to charitable activities.
· Can be revoked if it fails to meet CRA guidelines.
Best for:
Organizations that plan to solicit donations and operate for public benefit, such as food banks, religious organizations, and education-focused charities.
Choosing the Right Structure for Your Business or Organization
When deciding on a business or organizational structure, consider:
· Liability – Do you want personal protection from business debts?
· Taxation – Are you looking for tax advantages or simple personal tax filing?
· Funding Opportunities – Will you rely on investors, donors, or grants?
· Control & Governance – Do you want full control or shared decision-making with a board?
· Regulatory Complexity – Are you comfortable with ongoing legal and administrative requirements?
Final Thoughts
Selecting the right structure is a crucial decision that can impact your company’s growth, taxation, and risk exposure. If you are unsure which option is best for you, consulting a business lawyer can help ensure you set up your business correctly from the start.
At SB LLP, we specialize in guiding Alberta business owners and non-profits through business formation, contracts, and compliance matters. Contact one of our lawyers in our Corporate Department to discuss the best structure for your business or orga