Not Something You Should Try on Your Own, Part 3: Incorporation and Small Business Start-up
Posted by Darryl Aarbo — filed in Business Law
Part 2 of a 6 Part Series
The second legal task that one should not do on their own is to incorporate their own business. Anyone can head down to the local registry shop and get an incorporation, but should you?
First of all, I do not find that registry shops are that much cheaper than lawyers, some are actually more expensive. Many people assume that a registry shop is cheaper but then they add on a variety of charges making it more expensive. Always shop around. Find a lawyer with small business experience, like Aarbo Fuldauer LLP lawyers.
As with the wills example, I have had two cases this year where people had come to see me after a business venture goes sideways. They had a great business idea and the business was making money in their first year, but the two principal owners got into a dispute after the money started rolling in, they did not have any sort of agreement on what to do if they were actually successful. One person assumed it would be 50 – 50- no matter what. The other assumed they would each take out a percentage of what they put into the start-up costs. They were so focused on getting the business off the ground that when they did and the money was coming in, each had a different sense of entitlement as to how to divide the profits. In both cases these were best friends that went into business. They assumed that they would be able to work everything out as it came up, but never really discussed what to do after phase one was complete. In both cases, there was no friendship at the end and many thousands of dollars were spent on the dispute that could have been avoided with proper planning.
Some very basic legal advice and simple agreements provided at the time of incorporation would have avoided all the pain and suffering. Most lawyers with experience in this area can provide basic legal advice and agreement for a very modest cost. A basic incorporation agreement or unanimous shareholder agreement are invaluable documents and most lawyers have templates that can be easily modified to meet you initial needs as a start-up. Those basic agreements can be amended as the company gets more complex and the requirements changes, but the first few agreements do not need to be a major expense and can save you a lot of headaches.
Also, never get an agreement off the internet and sign something you do not truly understand. You could make the situation considerably worse if you have a bad agreement, as opposed to no agreement.
Another very important role for lawyers for a new small business is to do a lease review for a commercial lease. I have seen many businesses fail because they entered a bad commercial lease. Do not be fooled by thinking that you have had leases in the past so you know what you are doing and it is somehow “regulated” for the protection of the tenant. A residential lease is NOT the same thing as a commercial lease. These are two very different things and there is almost no protection for commercial tenants. The government does not protect or regulate commercial leases, it assumes the parties are sophisticated parties and can take care of themselves.
Never assume the landlord has your best interests at heart or that a lease is not negotiable. In these current times in Calgary, there is a lot of empty commercial space. Spending a couple thousand dollars on a lease negotiation could save you tens of thousands in rent later on.
Finally, if you have a great idea or a great name, make sure it is protected. Make sure your intellectual property is protected before announcing your idea to the world.
Your job is to come up with the great idea. Do not risk that idea and your investment by trying to save a few bucks on the legal services. All small businesses need good legal advice from a small business lawyer and good advice from a professional accountant. These are absolute musts for any business and especially for new companies.
By Darryl Aarbo of Aarbo Fuldauer LLP
For more information, please contact the law office of Aarbo Fuldauer LLP at:
Address: 3rd Floor, 1131 Kensington Road NW, Calgary, AB, T2N 3P4
Phone: (403) 571-5120
Email: [email protected]
Darryl Aarbo
Barrister & Solicitor
www.aflawyers.ca
