1. How do I protect a business name?
Where do you want to use it? If it is something you want to use all over the country, you may want to consider a federal incorporation or you may wish to trademark, maybe both. In the province, it can be registered as belonging to a proprietorship or partnership, or you can use the business name as an element of your company name if you decide to incorporate. The systems require that you search first to ensure that it isn't already in use, or so close to someone else's registered name as to cause confusion.
2. What is a Company?
A Company is a legal "person" with all of the rights and obligations that entails. It is an interesting creation in that it is meant to allow us to do business without attracting personal liability, but there is a tradeoff.
If the public is expected to do business with an incorporated entity,the public has a right to see what the company is up to, to a certain extent; the corporate records must be available for public viewing, so everyone has a right to know who the directors are and who the shareholders are.
3. Why, how, where do we need to keep corporate records?
Corporate records must be kept in a place and at a disclosed address that is accessible by the public. Many people choose to keep their records with a lawyer, and to retain that lawyer to keep their records up to date, with filing of annual reports, and preparation of annual resolutions. There is a cost involved but most lawyers who do this work are pretty competitive, able to keep you apprised of changes in the law and are insured to do this work for you. Accountants can keep your records for you but be careful, they are not allowed by law to charge you for the service of drafting resolutions, that would be practicing law illegally. Of course, you can take care of this yourself, but it will be important not to lose track of your annual filings and to keep up on changes in the law. The consequences and cost of correcting a mistake or of having to restore a company to the register after failing to file can be very expensive.
4. Should I incorporate my business?
It depends, from a legal point of view, incorporation is advisable to protect yourself from personal liability, but sometimes it is a question of tax benefit...I recommend speaking with your accountant before you decide, there can be tax benefits available in a proprietorship or partnership that are not available to a company.
5. Aren't shareholders and directors of a company personally liable if something goes wrong with the business?
Not usually, shareholders are only risking what they paid for their shares and a director is only liable in very specific circumstances where he or she should have performed better or should have known better. In my opinion it is not a good idea to be a director of a company unless you are involved in its day to day management. In a situation where the business carries large financial risk or with a public company, insurance should be purchased by the company to protect the directors from as much liability as possible.
6. What if I have already been in business for some time and I need or want to incorporate?
Business assets that belong to you usually must be transferred to the new corporate entity and this can be done tax free as long as your company issues you shares that are equal in value to the assets. You need to change the letterhead, invoices and business cards of your business because it is very important to use the full legal name of the Company. We don't want the public to be confused in dealing with you, we want them to know that they are dealing with an incorporated entity with limited liability.
7. How do I pass my business on to my family or my employees?
Again, this must go hand in hand with some tax planning but an accountant can help us to freeze value in preference shares held by you in your operating company and controlling and growth shares can be issued or earned by employees or by the next generation. There is even a provincial government program set up to assist and encourage successorship plans that involve employees buying their employers out overtime.
8. What are the first steps in buying a business?
Determine what you are buying; are you buying shares in a company or are you buying the assets of a business? Your lawyer and your accountant will almost always prefer that you buy assets, but there are exceptions here and sometimes you have no choice if the vendor is only willing to sell shares. Is there a realtor or business broker involved, or do you need your lawyer to draft a letter of intent and purchase agreement for you? Do you need to do some research prior to entering into a binding contract to purchase, for example, do you require financing or a landlord's consent?
9. What are the steps in selling my business?
Accounting advice first! What is the business worth and how can we sell it in the most tax effective way possible? Be careful when dealing with prospective purchasers, we don't want to share too much information about our confidential business affairs without a binding agreement in place. The problem with this is that the prospective purchaser needs to have certain information before they can make an informed decision on whether or not they should purchase and at what price. Sometimes it is a good idea to have a "Non-Disclosure" agreement drafted prior to giving the prospective purchaser things like financial statements, etc. Do you want to do this on your own, has someone approached you, or do you want a realtor or business broker to do the foot work for you in finding a buyer?
10.How do I finance my business venture?
There are many ways, you may want to invest your own money and can "lend" money to your company as a shareholder, you can even have security drafted to ensure that as a "secured" creditor you might enjoy priority in being paid back. You can borrow from a commercial lender, like a bank, although most banks being sophisticated creditors, will ask for a lot of security, they will want security that is registered in priority to any security that you may hold, and they often want personal guarantees from shareholders as further protection against risk. You can take on investors in the form of new shareholders, although you will want to be careful not to "give away the farm", and you may want to issue special shares to those investors, limiting any control that they might have by issuing them non-voting shares in the Company.