Umbrella Company


1

My dad also loved the business plan I had. He has his own company (which is not even close to what I am doing). He registered it as a sole proprietorship. He is an engineer so thats his company. He told me to basically register my company under his as a proprietorship. What are some benefits of that and what are some things to consider (if this is even possible). Also, will I have to pay taxes? What are some benefits of registering other than preserving brands (I am aware of obvious things like, you gain trust, things like more opportunities such as B2B). Should I even register if I just have to pay taxes? What are somethings that will happen once I register? I have to report everything?

How does the taxing works? I am not selling anything, just making revenue from advertising.

Legal Tax Canada Business

asked Aug 28 '10 at 10:27
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Bhargav Patel
784 points

5 Answers


2

You've got a lot of different questions here. Hopefully I can help with some.

The first thing that jumps out at me is that your dad's company is a sole prop. I could be wrong, but I'm not entirely sure you can have a sole prop as an umbrella company. And if you could, I would guess that you would also have to register your company as a sole prop. That means you would have no liability protection! You can offset that risk by purchasing liablity insurance. (This is something LLCs and Corps should also do anyways).

As far as your tax questions, it'll be hard for most of us on this site to give you reliable advice because you're located in Canada. I can tell you that there is no avoiding taxes...you will have to pay taxes. There are different types of taxes (and fees) and as a sole prop, you may be able to avoid some of the taxes an LLC or Corp would have to pay, but you'll still have to pay some taxes. For example, in my home state, LLCs and Corps pay a yearly $300 fee just for the priviledge of doing business in the state. Sole Props do not. But when it comes to income taxes, all entities (both businesses and people) are required to pay.

How does the taxing works? I am not selling anything, just making revenue from advertising.

If at the end of the year you net a profit, you will have to pay income taxes. How you made money doesn't matter...what counts is that you made money.

Also, will I have to pay taxes? What are some benefits of registering other than preserving brands (I am aware of obvious things like, you gain trust, things like more opportunities such as B2B). Should I even register if I just have to pay taxes? What are somethings that will happen once I register? I have to report everything?

This scares me. I could be misunderstanding your question, and if I am, please do clarify. But the way I'm reading this leads me to believe that you think you won't have to pay income taxes if you don't register your company. That just isn't the case. Everyone is required to pay incomes taxes on the amount of income they made in the year. This includes both individuals and companies. Now it's possible that in Canada there may be extra income taxes levied on businesses, so you may have to pay more taxes as a business entity than an individual, but you'll still have to pay income taxes in either case.

Again, I can't give you concrete answers, but hopefully I was able to clarify a few points for you. I added the Canada tag to your question. Hopefully that'll help you get more specifics to some of your questions.

answered Aug 28 '10 at 13:58
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Zuly Gonzalez
9,194 points
  • That sure helped Zuly. Btw, thanks for modifying my post and adding those tags. I tried to add them for some reason it did not let me (even though they were not new ones) – Bhargav Patel 8 years ago
  • Glad I could help. – Zuly Gonzalez 8 years ago

2

I have a sole proprietorship company in US. Things might be different in Canada, but your question strikes me as odd.

IN US, there is no such notion as "umbrella" sole proprietorship company or registering your company under someone else's sole proprietorship business.

The "sole" in "sole proprietorship" means "one" i.e. there's only one person owning that business. What sole proprietorship gives you is pretty much a fictional name that you can use when doing business instead of using your real name.

You can't do business under the name of your father's proprietorship - that would mean that all the income goes to his pocket.

I'm not sure what do you mean by "umbrella" company. Usually it's used to describe ownership e.g. Lab126 is a wholly-owned Amazon subsidiary, meaning that it operates as a separate company when it comes to taxes etc. but Amazon owns all the profits etc.

This doesn't apply to sole proprietorship because it can't issue shares of itself. Only businesses like LLC or C Corp or S Corp can be owned in that way. Sole proprietorship is just a name behind a person and you can't own people.

Like others said: you seem to misunderstand basics of taxes, corporate structures etc. You should take a few weeks with a book that explain those issues before asking intricate questions.

And as others also pointed out: this forum is mostly visited by US people. When asking about legal/tax advice, you need to always state that you're in Canada and even then understand that you'll be better off finding a Canadian-centric community for legal/tax issues.

answered Aug 29 '10 at 08:19
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Krzysztof Kowalczyk
1,950 points

1

How does the taxing works? I am not
selling anything, just making revenue
from advertising.

it is irrelevant whether you sell goods, get people donate money for screen space or make money running a business making bets (which actually one my my business operations does). What counts is profit. NET INCOME.

Income - Expenses = Profit. Profit is taxes.

Where the income comes from is irrelevant, as long as it is legal and not part of additional regulations (rarely). Same with expenses, though you may not be able to deduct ALL expenses, depends on tax law details.

Also, will I have to pay taxes? What
are some benefits of registering other
than preserving brands (I am aware of
obvious things like, you gain trust,
things like more opportunities such as
B2B). Should I even register if I just
have to pay taxes? What are somethings
that will happen once I register? I
have to report everything?

DO NOT START A BUSINESS - being clueless in running a business is the first step in making yourself a fool, which costs money.

Talk to your dad and have him explain you how a business RUNS, what to do etc. Yes, you will have to report eveything. This is part of what businesses do. You will have to pay taxes and fees (like for registration).

You forget one core advantage of registering a business - YOU ARE LEGAL. In most jsrisdictions it is illegal to run a busienss without registering. For example, you can notw write invoices without giving your business tax number which you cn only get - after registering. You can not legally sign a contract as a business without - having registered as one and stuff like that.

answered Aug 28 '10 at 17:54
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Net Tecture
11 points
  • Thank you. I will consult with my dad and his accountant tonight. – Bhargav Patel 8 years ago

1

I'm sorry, but I can't figure out how what your dad recommended is even possible, let alone advisable.

If each of you has a sole proprietorship, then each of you solely owns his business. I see no way that yours can be "under" his.

Is there something that I am missing?

Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.

answered Aug 30 '10 at 10:06
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Dana Shultz
6,015 points

0

What is your motive for placing it under your dad's company? I am not sure it is possible and rather than getting questions to your answers it seems like you should spend more time justifying your approach. I also think as others have hinted that you need a little bit more expecriene and knowledge to move forward. If you are serious, you are asking some pretty basic questions.

answered Aug 30 '10 at 10:07
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User3776
172 points

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