So, you’re starting a business? Here are some things you may want to consider:
Incorporation. Unless you know that you are going to do a booming business in your first year (or other considerations that make incorporation necessary), you might want to hold off on incorporating until there is enough income to warrant it. Most businesses take two to three years to break even and until you have income to leave in the corporation, there is no tax advantage to incorporating. Ask a lawyer or an accountant to look at your business plan and advise on whether incorporation makes sense.
Partnership/shareholder agreements. If another person is involved in your business, document any rights and responsibilities. How much money are you each contributing to the business? How will this be documented and repaid? What skills is each person contributing? How often will these skills be required and what is a fair rate of compensation? What degree of involvement will each person have in the daily decisions for each part of the business? Having these difficult conversations at the beginning will keep them from derailing your business later on.
Succession planning. Consider what will happen to unfilled orders if you are unable to work. This might happen if you become ill, but it will certainly happen when you want to retire. Will your partners buy you out? Will you sell your business? Does your business lender require you to have “key man” insurance to replace your services if you are unable or unwilling to continue? Whatever decision you make, document it so your successors can carry out your plan when the need arises.
Naming and licensing. Most municipalities require businesses to be licensed and Edmonton is no different. If your business relates to a regulated profession, you may also require a professional license and permission to use the business name of your choice. Consider getting these permissions and researching your chosen trade name before registering it. Even if there is no other business by the same name in your neighbourhood, it may be a trade name protected by trademark and copyright legislation. You do not want to go to the trouble of building a reputation and customer list only to discover you cannot legally use the business name.
Employing others. It is tempting to subcontract everything to self-employed individuals and avoid the overhead of payroll. However, if your contractor works solely (or primarily) for you and if you control the hours, location, and tools for that individual’s work, you may have an employee rather than a contractor. You may then be responsible for the overhead associated with having an employee (like making deductions from paycheques, WCB contributions, and compliance employment standards legislation). Properly identify the nature of your commercial relationships and document them accordingly.
Setting up everything properly can reduce stress and leave you free to grow your business.
The general information offered here is not intended to be legal advice. If you need a lawyer and cannot afford one, you may qualify for legal aid, or you may be able to access a free half-hour consultation through Edmonton Community Legal Centre.
Featured Image: It’s well worth your time to think a few things through before starting your business. | Pixabay