FROESE LAW
CORPORATE & BUSINESS LAW
In launching your business venture, it is important to pick the right business structure. Choosing the wrong business structure may have tax implications, limit your ability to bring on a partner or may expose you to unnecessary liability and risk. The business structure is the foundation of your business and it’s important to get it right. But remember, your legal entity may be ever evolving. In addition, it is important to maintain your corporate records, update your minute books, file your annual returns and negotiate your shareholders agreements.
Froese Law is an award-winning cross-border branding, corporate and commercial law firm. Our team of business lawyers and legal professionals are dedicated to structuring your business, negotiating your contracts and protecting, enforcing and commercializing your brand. Contact us today for a free consultation!
FROESE LAW SERVICES
Our Toronto Corporate lawyers have extensive experience with:
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Incorporation
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Minute Book Maintenance
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Sole Proprietorships
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Partnership Agreements
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Shareholders Agreement
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Annual Filings/Returns
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Business Name Registration
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Professional Corporations
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Corporate Dissolutions
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Sale and Acquisition
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Joint Venture Agreements
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Master Business Licenses
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Letter of Intent
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Agreement of Purchase and Sale
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Articles of Amendment
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B Corp Certification
FREQUENTLY ASKED QUESTIONS
What is a corporation?
A corporation is a separate legal entity. It has the capacity to enter into legally binding relationships, to sue and to be sued. Technically, the corporation is owned by the shareholders. A corporation can be federally or provincially incorporated. It can operate under a numbered company or as a named company. Overall, incorporations are a preferred business entity from which to operate your business.
What is a sole proprietor?
A sole proprietor is a for profit business that is operated by one owner.
What is an annual return?
In order to operate your business under an incorporation, it is necessary to maintain your corporate records on an ongoing basis. The annual return is a legal document that notifies Corporations Canada that your company is still active. This is mandatory and failure to do so may result in dissolution of your company.
What are the advantages and disadvantages of a sole proprietor?
There are many advantages to operating as a sole proprietor, which include the following:
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The owner owns all assets and profits of the business;
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Minimal legal requirements to maintain; and
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No separate tax records required.
However, there are several disadvantages to operating under a sole proprietorship, Oftentimes, the disadvantages outweigh the advantages, especially as your business grows. Examples include:
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Unlimited personal liability for the owner; and
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The owner is personally liable for all debts and obligations of the business.
What is a partnership?
A partnership is a for profit business operated by more than 1 person. A general partnership is where each of the partners are actively (and for the most part equally) involved in the business.
What is a limited liability partnership?
A limited liability partnership can only be formed for the purpose of practicing a profession that specifically allows for the formation of a limited liability partnership, such as law and accounting.
What is a limited partnership?
A limited partnership is variation of a general partnership, whereby one of the partners is significantly less involved in the business. The partnership would be comprised of a general partner and a limited partner. A key component of a partnership is that the partners owe a fiduciary duty to the partnership and also to one another, which encompasses a duty of loyalty and a duty to avoid conflicts of interest.
What are the advantages and disadvantages of a partnership?
There are advantages and disadvantages of entering into a partnership. Here are some of the advantages:
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A potentially larger pool of investment;
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Sharing of financial and legal risk; and
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Sharing talent and responsibilities between partners.
Here are some of the key disadvantages:
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Unlimited personal liability;
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Joint and several liability; and
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Vicarious liability for the acts and omissions of the other partners.
What are the advantages and disadvantages of incorporating?
Here are some of the advantages to operating your business under a corporation:
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The owners have limited liability;
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A corporation never dies and can survive those operating the corporation; and
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There can be tax advantages to operating as a corporation.
Although the limitation of liability is a huge pro for incorporations, there are some disadvantages, such as
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There is a greater (although not significant) cost to incorporating, as opposed to operating as a sole proprietor or partnership;
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There is a greater (although not significant) administrative obligation to incorporate and maintain the corporation.
There have been changes in my company. What is required?
These changes need to be recorded in your corporate documents/minute book and also may need to be filed with the government. Examples of changes that need documentation include:
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Registered Office Address
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Changes to Directors
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Changes to Articles of Incorporation
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Changes to Shares
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Changes to By-laws
Who owns a corporation?
Shareholders are typically the owners of a corporation. They hold the right to elect directors and/or officers, vote at annual meetings on corporate matters and share in the profits of the corporation.
What are by-laws?
Every corporation must have by-laws. By-laws are rules that govern the internal operations of a corporation and can be found in the corporate minute books. The director of a corporation has the power to make, repeal and amend the corporation’s by-laws. A shareholder is required to approve any changes to existing by-laws or any new by-laws at the first shareholders’ meeting that usually takes place after the directors have passed the new amended by-law. Any changes to the by-laws should be recorded.
What are the requirements under the Business Names Act?
If the corporation carries on a business other than as it is incorporated, it must register a business name.
What is the difference between a trade name and business name?
Trade names and business names simply identify the business. The available causes of action that can be used against an infringing party by a trade name/business name owner are limited, as opposed to those available to the owner of a registered trademark. The function of a trademark goes beyond the scope of a trade name/business name to identify the company as the source of the product/service in the marketplace. The trademark is the indicia that the consumers identify with the company and its products and/or services.