The Horsemen's Benevolent and Protective Association of Ontario
Types of Ownership
Congratulations on your decision to become a part of this incredible industry.
Now you have to ask yourself what type of Ownership best suits my needs? Your choice will determine the amount of risk, tax considerations, the number of participants involved and other circumstances which are unique to our industry.
Sole Proprietorship will allow an individual to carry on a business in his or her own name without having to complete any legal documents or other formalities. This individual, as the sole owner of the business, has the right and responsibility to make all decisions concerning the business. If you wish to carry on business under a name other than your own (a trade name), there are registration requirements.
Since the Sole Proprietor does not have a separate legal identity, all income, capital gains, or losses are attributed to the owner and taxed in the owner’s hands. This is useful for the first few years when your business usually incurs losses which can be offset again other personal income (Section 31 of the Income Tax Act).
Once your business starts to earn profit, you may wish to incorporate to takes advantage of tax deferrals. This would be the best time to speak with your accountant.
Disadvantage to Sole Proprietorship is the lack of separate legal identity. You are personally liable for any losses incurred by the business and all personal asset’s are at risk in the event of business failure. You would also be liable for actions of any employees of the business during their employment.
We recommend getting appropriate insurance coverage for protection.
When two or more people carry on a business together with a view to make a profit, they have formed a partnership. Each partner has personal involvement, control and is entitled to share in profits and losses.
Partnerships are governed by provincial legislation. Its recommended that names and addresses of the partners, along with the partnership name (Business) be registered with the appropriate government agency.
Partners are recommended to draw up agreements between themselves to deal with management of partnership, distribution of profits, liabilities, and anything that’s important.
Co-Ownership consists of two or more individuals who purchase a horse together. It’s always recommended co-ownership agreements are created to identify the interests of each owner and their obligations.
For tax purposes, each co-owner is treated like a sole proprietor. Each person’s share is taxed at his or her own rate.
Anyone can be a co-owner including an individual, a partnership, a trust or a corporation.
One or more individuals can incorporate a company to carry on business. A company has its own legal personality distinct from its owners; as such, it can sue or be sued in its own name, enter into contracts, own property and remain intact through the deaths of its owners or the transfer of business to new owners.
Unlike sole proprietorship and partnerships, a company does not exist until its properly registered with the government.
Syndicates are becoming a popular way for individuals or investors, who couldn’t afford to purchase a race horse, become new owners. They allow interested parties to purchase a percentage of a horse, whether yearling or currently racing.
Investors come together to purchase a race horse, stallion, or horse operation, with a view to making a profit like a business.
In most syndication’s, the role of the investors is relatively passive. There is usually one managing partner or experienced horse person who takes the role of management and control of the horse operations.
Often, there is some tax advantage to participation in a syndicate.
Watch Owner Rob Marzilli explain how he went from a Sole Proprietor to a Partnership with family and friends (Jim Fera), creating La Amici Stables in this Talkin’ Horse Racing clip: