Top 7 Questions Asked By New Entrepreneurs

Disclaimer: This article is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

If you are starting a business in Ontario, welcome and congratulations! It is so exciting to see people take their passion and ideas and build a business.

We’re sure you have done a lot of planning and preparation to get you to this point, including market research and deciding on your business name. You have a strong idea of your product or service and how you are going to bring it to market.

However, you may also be feeling a little overwhelmed with the legal side of things. You may be getting conflicting advice and having a hard time sorting out what you need to do to protect this wonderful business you are creating.

In this article, we will answer your frequently asked questions and help you find peace of mind as you embark on your journey into entrepreneurship!

Question #1: What kind of business structures can I choose from?

Assuming you are a for-profit business, you have five choices: a sole proprietorship, a partnership, a joint venture, a limited liability partnership, and a corporation.

A sole proprietorship is a business owned and run by one individual with no distinction from the owner. It’s easy to start, but your personal assets are exposed in the event of a lawsuit.

Partnerships have two or more owners who contribute their capital and/or skills for a share of profits without being taxed as a unique entity.  They also share in the liabilities of the partnership.

Joint ventures are two or more people who come together to collaborate on a project. They may contribute their capital and/or skills with an agreement that allows them to keep their profits and liabilities separate.

Limited liability partnerships are a combination of a partnership and the tax benefits of a corporation. They are limited to certain professions, such as lawyers and accountants.

Finally, a corporation is a distinct legal entity that is owned by the shareholders. It can sue and be sued, as well as purchase and sell property. The shareholders are not personally liable for the corporation’s debts or liabilities except to the extent of their investment in stock.

Question #2: Do I need to register my business name?

In Ontario, you need to register your business name if you are doing business as anything besides your legal name.

Fortunately, applying for a master business licence is a fairly easy process and can be done online. You’ll want to first do a search to make sure that your name is not already being used.

Master business licences are valid for five years, so once you register yours, be sure to mark the date that it will need to be renewed.

Question #3 – Should I incorporate right away?

We devoted an entire blog to this question, but here is the short answer: maybe.

It is not always necessary to incorporate your business right away, and it would be wise to weigh the pros and cons. On one hand, you are limiting your own personal liability and may be in line for some tax benefits. On the other hand, incorporating incurs extra expenses and requires additional paperwork to be filed annually.

If you do decide to incorporate, you’re going to want to involve a lawyer in the process. A skilled lawyer will be able to ensure that your Articles of Incorporation not only serve your needs today, but will continue to do so down the road.

Question #4 – What contracts do I need?

It will, of course, depend on your business but some contracts that a new business may need include a service contract, employment contract, lease, and non-disclosure agreement.

If you opt to form a partnership, then a key contract that you will need is a partnership agreement setting out how your business will be run. Similarly with a joint venture, you will need a joint venture agreement.

You also need to consider your website and online presence. If you’re collecting people’s personal information, do you have a privacy policy in place? Does your website have terms and conditions? You will want those pieces in place and ensure that they comply with the current legislation.

Question #5 – Do I really need contracts in place?

Yes.

Question #6 – Do I need a contract if I’m doing business with my brother, mother, best friend, etc.?

Yes.

Having contracts in place protects your business and your relationships. Memories can fade and what was agreed upon in an oral conversation can be remembered differently years later.

A contract will clearly spell out the terms and conditions of the agreement for both parties, as well as establish remedies if those terms are not met. Having expectations clearly spelled out will minimize disagreements and prevent misunderstandings from becoming a larger issue. 

Question #7 – Can I use online templates?

You can, but even then you will want a lawyer to review them. It is hard to know if online templates are accurate and if they fit your business needs.  

In particular, a common issue that we see is a client who has downloaded a template that is not even drafted for Ontario, let alone Canada (e.g. American templates).  That kind of template is virtually useless to you, which is another reason why you need to have a lawyer involved.

As well, we recently were approached by someone who had been using an online template. With changes in her business, there were areas where her contract was unclear and it was negatively affecting her business.

Discussing your contracts with a lawyer will ensure that your contract fits your needs and covers the terms that are important to you. As well, an experienced business lawyer will see gaps that you may not even realize are there! 

A well-drafted and comprehensive contract will help protect you, but it is only as good as the person who wrote it. Having a lawyer draft your contracts can give you peace of mind that someone else has taken care of looking out for your best interests.

Where can I find advice that I can trust? 

From Beeksma Law, of course! 

At Beeksma Law, we have extensive experience helping entrepreneurs build strong legal foundations for their businesses. We are actively involved in the business community in Ontario and are driven to help others succeed. 

If you would like to learn more about how you can get your business started off on the right foot, then book a call with us today. Our team would be more than happy to discuss your business needs. 

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