Legal Forms of Business

A legally constituted business may take one of the following forms:

• a sole proprietorship (business made up of a single owner);
• a partnership (business made up of at least two persons called partners);
• a corporation (business made up of one or more persons called shareholders).

The legal structure you choose for your business is important, as it will affect

• your income tax obligations (tax returns and other forms, tax payable, etc.);
• your liability for the debts of the business.

Important

Your income will be considered business income only if you operate your business on a commercial basis.

If the activity you engage in is strictly a hobby, you will not be able to deduct any losses you incur.