Business Formation Lawyer in Toronto, Ontario
According to the statistics website Fundsquire.ca, around 95,000 new businesses are started each year in Canada. That breaks down into 260 startups a day, or 11 every hour. The COVID-19 pandemic of 2020 had a dramatic impact on business in general, but in 2021, the economy seems poised to resume its growth.
Success in founding and operating a new business venture is dependent upon several factors. Solid financing and hard work are two essential components, as is the structure you choose under which to operate — whether as a sole proprietorship, a corporation, a partnership, or a co-operative.
If you’re looking to start a business in or around Toronto, Ontario, including Hamilton, London, or Ottawa, contact Matthew R Harris Law P.C.
Lawyer Matthew Harris can help you choose the right type of business organization to use and then help you file the legal documents to get you started. As you venture forth in the business world, he will stand ready to assist you with any legal issue that arises, including the negotiation and completion of necessary contracts.
There are four common types of business structures: the sole proprietorship, the partnership, the corporation, and the co-operative. Which one you choose will determine to a large extent how much personal liability you will face and how you will be able to access financing to fund your operations.
This type is just what the name implies: a single person opens a business. Generally speaking, the startup costs are the lowest of all business forms, and the paperwork is also less demanding than for other organizations. As a sole proprietor, however, you will be responsible for everything, which means if you’re sued, you’re on the hook, and if you run up debts that get out of hand, the creditors will come after you. Financing is another challenge. Banks are reluctant to loan to sole proprietorships, and you cannot sell stock. You either have to tap into your own savings or retirement accounts or rely on investments from family and friends.
A general partnership is much like a sole proprietorship but with more than one owner. Risk is legally shared by all, but if one partner runs up debts and disappears, the other partners can be held liable. Conflicts about the direction and management of the company can also disrupt operations and threaten the survivability of the company. Again, financing can be a challenge, as banks will be reluctant to lend, and selling shares isn’t an option. Written partnership agreements are not required except in Quebec, but are strongly recommended.
To better limit liability, you can set up a limited partnership (LP), in which one person (designated as the general partner) manages everything and assumes most of the liability. A limited liability partnership (LLP) protects the assets of the other partners if one partner creates a situation that results in a lawsuit. LPs and LLPs generally have more access to investors than do general partnerships.
A corporation is a separate legal entity, so the assets of the founders are protected. Only the money they put into the corporation to initially fund it may be at risk. They, in turn, will be shareholders and can receive dividends and/or salaries if they take management positions within the corporation. They can also sell shares to raise funds when needed. Filing and paperwork requirements are more complicated, however, starting with the articles of incorporation that must be completed and submitted to the provincial, territorial, or federal government where the corporation is being established.
A co-operative is like a partnership with the benefits of a corporation because liability is limited just as it would be with a corporation, while profits are distributed among the members of the co-operative. It is a less-common business type, but it is used by both non-profit and for-profit organizations. Management is democratic in the sense that the members of the co-operative make decisions jointly, which can be problematic if they can’t agree on issues.
How Legal Counsel Can Help
To protect you from liability, you first must choose the proper business structure for your new venture. When you meet with a lawyer, you can review your goals, your resources, and your personal financial situation, and be advised on the proper course to take. This is especially important if there are two or more individuals involved in the venture.
If you’re forming a partnership, you will definitely need a partnership agreement, and you will want to consider the benefits of the limited partnership or the limited liability partnership. If you’re forming a corporation, you will need to create ironclad articles of incorporation to protect yourselves and your assets as you grow your business.
Whatever type of business structure you choose, there will no doubt come a time when you must create contracts with suppliers or other documentation necessary for your business. You will need legal assistance in creating these agreements. If a contract is vague or poorly worded, when a dispute arises, you may find it difficult to enforce what you thought you had agreed upon in the contract.
Business Formation Lawyer
Serving Toronto, Ontario
Matthew R Harris Law P.C. assists businesses in the greater Toronto, Ontario area with legal issues they face. Lawyer Matthew Harris and his associate Yonatan Lipetz will work with you and get your business venture off to a great start, with all of the legal requirements being met. Reach out to help turn your business dream into business reality.