Business Structure
They say that structure is freedom, and in a sense it is. When you’re dealing with multiple constraints, you have to figure out what you can get out of that. ~ Demetri Martin
Once you have your vision for where you want to go in your business, you need to determine which legal business structure fits best to get you there. The two structures that therapists, counsellors and helping professionals generally choose between are:
Sole-Proprietorship and Incorporation.
Both have advantages and disadvantages, and I highly recommend speaking to your accountant or lawyer to review which is right for you. You may have different circumstances based on income from other sources, or other family member’s situations that may make you better suited for one option rather than the other.
That said, most therapists in private practice are operating as Sole-Proprietors. It has the lowest start-up costs and tends to offer the most flexibility for an individual running their own service-based business. Particularly when starting out, it is the fastest route to registering your business. The only steps required are registering the business name and potentially getting a GST number (we will talk more about this in the finances module). Additionally there can be advantages for you personally on your tax return due to the business expenses that can be written off.
A general rule of thumb is you may want to look at incorporating once your income hits around the $80,000 to $100,000 mark. Until then, for most straightforward service-based small businesses, the tax benefits do not offset the costs of running an incorporated business. Also, keep in mind that you can always incorporate at a later date if your circumstances change. For example, if down the road your income increases or you decide to start selling more products, you may decide to become incorporated at that time. Where you may want to look at incorporation from the start is if you are planning on immediately offering products or other services outside of 1:1 sessions. This is because incorporation allows for a legal separation between you and your business, so if something happens to the “business”, you personally may be protected.
Again – check with your accountant and lawyer to make sure you are making the best choice for your specific circumstances.