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The Canada Business Corporations Act and other federal laws set forth a fairly narrow definition of a corporate reorganization, primarily applying to corporations that are insolvent, or in other words, bankrupt. In general, insolvent corporations reorganize or dissolve, and those are both obviously forms of reorganization. However, in common usage, reorganization has taken on a broader meaning that can include any number of measures by a corporation that have nothing to do with insolvency or bankruptcy. Anytime a business changes its structure in some way, that is considered a reorganization in the business world. The changes can be minor or significant – reorganization is a flexible tool for business to accomplish any number of goals.

Obviously, no one starts a business on a whim and one day just opens up shop. Months, sometimes years, of planning occur before a business actually opens to the public. From the most basic of questions, such as what kind of business you plan to engage in, to more complicated questions, including whether you will have partners or investors, who will own how much of the business, and related issues, a great deal of thought goes into forming and opening a business. Often, opening a business can be the most expensive, ambitious, and risky endeavour you will ever undertake. Proper planning matters.

Ontario has three primary forms of business structures — sole proprietorships, partnerships, and corporations. Your choice of which form of ownership you choose for your business could depend upon ease of formation, the expense of formation, taxation considerations, liability issues, control over company resources and decisions, and other factors. Each business form has different advantages and disadvantages, and you will have to decide which form best suits your situation and business goals. In this post, we will examine the three most common structures and highlight some of the pros and cons of each structure.