The Importance of Incorporating Your Business

Date: 06 Mar, 2014| Author: Fred Streiman

Often clients come to meet me and discuss business opportunities, methods of business registration and the liabilities which they can incur. From the outset of the meeting, I try to establish: the goals of the client, the reason for starting up a business, and the liability exposure that they can undergo on a personal basis. This can mean that their principal residence or home and other assets can be seized by creditors in the event that the business becomes insolvent or bankrupt or if creditors pursue claims for unpaid debts.

There are several methods to register a business. If the client is a sole proprietor, or is partners with one or more individual, then such registration can be completed with the cost of registration very low. Such registration of a name does not protect the use of the name, since only a trademark or copyright agent can complete a registration of such name, process or invention.

By taking this route, the individual(s) are exposed to personal liability. If the individual(s) instructs to incorporate a company, proper NUANS search for names of similar businesses across Canada would be conducted, name approved and then company incorporated. In a limited company, being incorporated, the individual is limited as to liability. However, such individual(s) such as the director(s), officers and/or shareholder(s) of the corporation can be liable for any trust monies unpaid, such as GST, withholding taxes to Canada Revenue Agency, WSIB premiums, sales taxes provincially and if any misdeed occurs, then the corporate veil can be pierced and the individual held liable.

In any corporation, the appointed person(s) are the director(s) and officers such as President, Secretary and Treasurer and then there are shares to be issued. Most companies incorporated provincially in Ontario are private corporations, and the names of the shareholders are not revealed by any filings with Companies Branch so such shareholders can be withheld from most public inquiry as to ownership of the company. Shares can be issued in varieties such as the voting or Common shares, or shares having some return or restriction, such as Special Shares. There are other options to incorporate on a Federal basis and these can be discussed with the lawyer handling the file.

In each and every instance of either registering an unincorporated entity or an incorporated entity, it is recommended that the clients immediately consult their own Accountant or Tax expert to obtain their own advice as to their tax situation, both in business and on a personal basis since both overlap. In such situations, there may be certain tax and estate planning that are necessary. Of course, with such business registration or incorporation of a company, it is recommended that Wills and Powers of Attorney for Property and for Personal Care/Health Decisions be prepared and executed in view of the requirement for these forms of powers of attorney under the provisions of the Substitute Decisions Act of Ontario in force since 1995 and applicable to all residents in Ontario and others.

With the start up of a business, if there are partners, then the Partnership Act of Ontario applies and a partnership agreement for the parties is strongly recommended to be prepared. In a company, if more than one party is involved, either as director or shareholder, then a Shareholding Agreement is recommended to be prepared and executed at the onset of the business to avoid any later disputes that cannot be settled by mediation or arbitration. Of course all of the above legal work is completed by our firm and costs are set out in our website and can be obtained by the relevant lawyer retained to do such work, either Elliott Dale as senior partner practising since l97l or Steven Klein, associate lawyer with more than l0 years experience in business, corporate, and insolvency practice of law.

What is important to note to all clients is that to run a business is to run a risk and how to minimize such risk to such clientele is the important issue to all clients of Dale Streiman Law LLP. To be a client of Dale Streiman Law is to be an educated client not just in this area of law but we at Dale Streiman Law LLP wish to be helpful in many other areas with 6 lawyers and one associate lawyer able to provide services including a litigation section and with a special emphasis on family law. This latter reference includes rights of spouses in business and shared family assets.

We would be pleased to receive any comments and meet with any prospective clients to educate such clients in any of the above areas of law. Feel free to Contact Us with any inquiries you may have.