guide starting a small business from connectlegal
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Legal Guide Starting a Small Business in OntarioTRANSCRIPT
Legal Guide
Starting a Small Business in Ontario
Connect Legal is a registered charity that provides free
legal services for small businesses. Registration
number: 84434 5264 RR0001
This information is provided for your convenience only
and does not constitute legal advice. Connect Legal
does not assume responsibility for loss or damage
arising from using this guide.
MADE POSSIBLE BY
2
Introduction…………………………………………………………………………………………………. 3
About Connect Legal…………………………………………………………………………… 3
About the Toolkit……………………………………………………………………………….. 3
Business Structures ……………………………………………………………………………………… 4
Rules and Regulations………………………………………………………………………………….. 5
Financing Your Business………………………………………………………………………………. 6
Opening a Bank Account ……………………………………………………………………………… 7
Income Support for Small Business Owners ………………………………………………… 7
Understanding Contracts …………………………………………………………………………….. 8
Connect Legal Success Story: Sanjay Pandrala ……………………………………………… 9
Hiring Employees ………………………………………………………………………………………… 10
Protecting Your Name and Products ……………………………………………………………. 11
Passing On Your Family Business …………………………………………………………………. 11
Renting vs. Buying – Space and Equipment …………………………………………………. 12
Case Study – The Real Jerk …………………………………………………………………………… 13
Marketing …………………………………………………………………………………………………… 14
Connect Legal Workshop and Free Lawyer Matching Program ………………….… 15
Appendices ………………………………………………………………………………................... 16
Table of Content
3
About the Toolkit
This guide and the appendices are not intended to provide legal advice, but it will
provide an overview of some of the legal issues you should be thinking of as a small
business owner. An electronic version is available on our website. For legal advice,
you will need to consult a lawyer.
Connect Legal is a registered charity that fosters entrepreneurship in the immigrant
community by providing free legal advice and educational services to low-resource
small business owners. Our staff and volunteer lawyer network recognize that some
small business owners may face challenges due to limited financial resources,
language barriers and unfamiliarity with the Canadian legal system. By helping these
entrepreneurs to succeed, Connect Legal seeks to contribute to the overall economic
prosperity of the community. To find out more about our services and to sign up for
our newsletter visit www.connectlegal.ca
As a registered charity, we gratefully appreciate financial donations along with the
contributions of volunteer lawyers. Find out how you can support our efforts to foster
successful small businesses in your community at www.connectlegal.ca
About Connect Legal
4
You can set-up your business as a:
Sole proprietorship, where you are the business and any profits and losses
arising out of the business are personal. As a sole proprietor, your personal
wealth is exposed to business liability.
Corporation, where the business is legally separate from you and your
personal wealth. Any profits or losses arising out of the business belong to
the corporation.
Partnership, where the business profits and losses are shared between you
and one or more owners. Partnerships can be individuals or corporations.
Cooperative (co-op), where the members who use the services jointly pool
resources and share ownership of the business.
Consider:
Who will own the business, make decisions and bear risk?
Financial and tax benefits with different business structures.
Next Steps:
Visit ServiceOntario’s “Business” website.
Choose a business structure and file necessary paperwork.
Register the name of your business and get a Master Business License.
Consider (i) a partnership agreement, if a partnership, (ii) articles of
incorporation and by-laws for a corporation.
Business Structures
5
You will want to research whether any licenses and permits will be needed to
run your business. Governments and business partners often require these
documents. Some of the benefits of obtaining the necessary licenses and
permits are:
Major suppliers and customers will then be able and more willing to do
business with you.
You can avoid fines or being shut down for not having the proper
paperwork or permissions.
You can get basic guidelines and instructions on how to conduct your
business safely.
Getting things started on the right track will allow your business to grow.
Consider:
What is the real cost of running a properly licensed business?
Are there restrictions on the sort of businesses you want to start?
Next Steps:
Visit BizPal.ca to search for applicable permits and licenses.
Contact your local city government office to find out the kind of business
that is permitted at your location and whether there are any restrictions.
Understand the taxes (e.g. sales taxes, employee-related taxes, such as
payroll deductions and remittances) you must collect and send to the
government and register your business with the Canada Revenue
Agency. Visit the CRA’s website for small business and self-employed
individuals to learn about your tax obligations.
Rules & Regulations
6
Financing Your Business
Ways to raise money for your business include:
Borrowing money from family and friends.
Taking a loan or using credit from a bank or lender.
Selling a part of your business to an investor.
Making sure that your customers pay on time.
Consider:
What is the true cost of each type of financing? Credit cards and loans can
be very expensive. Check the interest rate: is it fixed or can it be raised? If
borrowing money from family and friends, when do you need to pay them
back and will you owe interest?
Do you have a business plan? Some lenders and investors will require it.
If you sell part of your business to an investor, what rights will the investor
have in the business?
Next Steps:
Make sure you know and write down that you are receiving a gift of money,
a loan or an investment. Clearly write down any terms or conditions
attached to the money.
Have a clearly written agreement with lenders or investors (even if they are
family) outlining the terms attached to the money.
Talk to your bank or local micro-lender to learn how you can become a
borrower.
Consider attending a financial literacy class.
7
No matter how small your business is, you should consider opening a bank account
in order to keep your personal funds separate from your business funds. This is
especially the case if you choose to operate your business through a corporation
or partnership.
In order to open a bank account, the bank will require proof that you have
established a business. For example, a bank may require personal identification
from you as well as the documents establishing existence of the business.
You should consult your local bank to discuss the bank account options offered as
well as to find out the documentation required to open an account.
Opening a Bank Account
Income Support for Small Business Owners
If you are currently receiving government income support, you may qualify
for small business development program.
Self-employed individuals may be able to apply for special EI benefits if
they are registered for access to EI.
Next Steps:
Investigate if you qualify for any of the following: Ontario Works, Ontario
Self Employment Benefits Program, or Ontario Disability Support
Program.
8
A contract:
Is an agreement between people or legal entities to do or not to do
particular things. Examples include agreements for buying or selling, leases,
and services contracts.
Is an opportunity to write down what everyone agreed to, so that you can
minimize misunderstandings.
Can sometimes be overruled by government laws and regulations (such as
employment law, human rights law, consumer protection laws etc).
Can be a good tool to manage your business risk.
Consider:
Who is part of the deal? Take a close look at the person or legal entity
signing.
How and when do you get paid or need to make a payment?
Have you included important details such as quantity, quality, timing and
effort requirements?
What happens if something goes wrong? What rights or obligations do you
have?
Next Steps:
Develop the contracts you will need for your business by looking for
examples and talking to a lawyer.
Take time to understand contracts before you sign, and do not sign if you do
not understand.
Negotiate everything!
Understanding Contracts
9
Connect Legal Success Story:
Sanjay Pandrala
With a B.Sc. in horticultural science from India and work
experience in India, Oman and Canada, Sanjay decided
that if he truly wanted to get ahead, he should start his
own business. With the purchase of a sprayer and the
distribution of some flyers, Bugman Pest Control was
launched with a $350 start-up capital. Sanjay’s
perseverance has paid off as Bugman’s client base has
been continuously growing!
Sanjay leveraged Connect Legal’s program to develop
customised employment and customer contracts that
are essential to run his business. “Legal advice is vital,”
says Sanjay. “We couldn’t have started the business
without it.” He is a recipient of the Most Promising
Immigrant Entrepreneur Award from Connect Legal.
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Hiring Employees
To build a good relationship with your employees while protecting your business, take
the time to:
Get to know all the laws that protect employee rights, getting legal advice as
necessary.
Draft a good job description so that both you and your employee can evaluate
whether the employee is doing a good job.
Use an employment contract that complies with existing laws:
o The law states that some employee rights (such as minimum wage)
cannot be changed by the contract;
o A contract can offer the employer certain protections such as ensuring
that the employee does not go to a competitor and that confidential
information is not shared with others.
Make deductions and file government documents and returns.
Make employee decisions based on job performance.
Keep detailed records of all employee matters e.g., vacation, sick days,
performance evaluations, problems and jobs well done.
Consider:
What is the true cost of hiring each employee: are you ready to commit to an
employee including all wages, training costs, mandatory payroll taxes and
remittances and potential severance costs?
Next Steps:
Visit the Government of Ontario’s A Workbook for Employers web page.
Visit the Canada Revenue Agency’s Hiring an Employee web page.
11
To protect your business name and reputation, search online for similar names in
use when you register your name with the government. Your name receives limited
protection where you do business, but consider paying for a trademark for
enhanced cross-Canada protection. As your business grows, speak to a lawyer about
more ways to protect your business name and products.
Next Steps:
Ensure your business name is registered with the government.
Consider registering a trademark with the Canadian Intellectual Property
Office.
Protecting Your Name and Products
Passing On Your Family Business
Who should inherit your business? Your legal will ensures that your business
interests are distributed according to your wishes in a timely and cost-effective
manner. If a business has multiple owners, all owners need to plan how the
business can survive.
Consider:
What will happen to your business if something happens to you or your
partner? How will your family pay the bills?
Next Steps:
Seek a lawyer’s help to draft or revise your will. There are special
requirements in law that must be satisfied for a will to be valid.
Make business arrangements in the event something happens to you to
ensure your wishes are carried out.
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Starting a business may have significant upfront property and equipment costs. When
deciding whether to rent or buy think about more flexible and less costly alternatives:
Instead of renting a long-term space, consider sharing a desk, renting a stall,
using an agent or operating online.
When choosing a location, consider your all-in costs, uses permitted and
convenience for your customers.
For equipment consider quality, customization needed, availability of customer
support and the reputation of the seller or lessor.
Your space and equipment commitments should be flexible.
Consider:
Do you have cancellation rights? What are the penalties?
Who are your neighbours? Are they a good fit for your business?
Are you allowed to operate your business out of your house?
What insurance do you need?
Next Steps:
Figure out what your business can afford and be careful not to over commit.
Carefully research the seller, landlord or person renting to you.
Review the lease or purchase agreement and negotiate concessions, preferably
with advice from a lawyer.
Renting vs. Buying— Space and Equipment
13
Case Study— The Real Jerk
The Real Jerk was an iconic Jamaican restaurant at the corner
of Queen and Broadview that was given only one month’s
notice to move out after 22 years at the same location. The
building was sold and the new Landlord wanted to demolish
the building to make way for a new condo development. The
Real Jerk issued a statement saying that, “We would have
hoped to stay longer, long enough for us to secure a new
location but [it would] not be feasible.”
The restaurant was finally reopened at a new location a year
and a half later. This is an excellent lesson in understanding
your rights as a tenant and ensuring your lease protects your
business.
14
Telling potential customers that you are offering products and services is vital to the
growth of your business. However, when you are advertising, you must ensure that
you do not violate the Competition Bureau of Canada guidelines. Advertising is
generally acceptable if it is not fraudulent, misleading or deceptive.
To find customers, consider who your target customers are and what type of
advertising they will be most impacted by (Google ads, newspaper ads, radio, etc.).
You may also consider building a website to help you advertise your business online.
Websites establish credibility and help you to market your business.
Consider:
Creating appropriate a privacy policy and using customer information
accordingly.
How to protect customer data from theft.
Ways to ensure that you do not spam your customers.
Next Steps:
Visit the Competition Bureau of Canada’s website.
Visit the Privacy Guide for Small Business at the website of the Privacy
Commissioner of Canada.
Review Canada’s Anti-Spam Legislation
Marketing
15
Connect Legal Workshop and Free Lawyer
Matching Program
Connect Legal offers workshops on legal issues for small businesses in cooperation
with Community Partners. These workshops are ideal for new small business
owners looking to get a good overview about the legal issues that would apply to
their small business. If you would like to become a Community Partner, please
contact us.
Connect Legal also offers free one-on-one legal advice for eligible low-resource
small business owners who are new to Canada. A volunteer lawyer can help you:
Review government rules and regulations to help your business
successfully operate.
Create or review contracts for use when buying or selling products and
services.
Other legal matters related to the growth of your business.
Connect Legal also has many resources and useful links on legal issues for your
small business. See our website for eligibility criteria and further details of our
programs.
Visit us at http://www.connectlegal.ca.
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Registered Charity Number:
84434 5264 RR0001
Front cover photo: Carolina Velez, Colombia Exotic
Courtesy of Jacquie Labatt
Back cover photo: Igor Chigrin and Tatiana
Zherebkova, Win Global Partners
Written, edited, and produced by
Connect Legal: Advice for Immigrant Entrepreneurs
With funding from Metcalf Foundation
Phone: 416-964-3933
Website: http://www.connectlegal.ca
E-mail: [email protected]
20 Bloor Street East
P.O. Box 75005
Toronto, ON M4W 3T3
17
Appendix 1: List to Helpful Resources ………………………………………………… 18
Appendix 2: Top 10 Ways for Small Business to Avoid Legal Troubles .... 19
Appendix 3: Checklist for Creating and Using Contracts .…………………….. 20
Appendix 4: Sample NUANS Name Search Corporation ………………………. 21
Appendix 5: Sample Master Business License..……………………………………. 22
Appendix 6: Sample Articles of Incorporation ..…………………………………… 23
Appendix 7: Sample Business Name Registration.……………………………….. 25
List of Appendices
18
Appendix 1: Links to Helpful Resources
Below are the current links to all the online sources mentioned throughout the toolkit. For the most updated information please visit Connect Legal’s website: http://www.connectlegal.ca/resources-links/
Business Structures
Service Ontario: www.ontario.ca/government/services
Rules and Regulations
BizPal: www.bizpal.ca
Canada Revenue Agency: www.cra-arc.gc.ca
Opening a Bank Account
Royal Bank: https://www.rbcadvicecentre.com/business_advice
Scotia Bank: http://www.scotiabank.com/ca/en/0,,3,00.html
TD Canada Trust: http://www.tdcanadatrust.com/products-services/small-business/smallbusiness-index.jsp
CIBC: https://www.cibc.com/ca/small-business.html
Income Support for Small Business Owners
Ontario Works: www.mcss.gov.on.ca
Ontario Self Employment Benefits Program: www.tcu.gov.on.ca
Ontario Disability Support Program: www.mcss.gov.on.ca
Hiring Employees
Ontario Government “Workbook For Employers”: www.labour.gov.on.ca/english/es/tools/esworkbook
Canada Revenue Agency “Hiring An Employee”: www.cra-arc.gc.ca
Marketing
Competition Bureau of Canada: http://www.competitionbureau.gc.ca/eic/site/cb-
bc.nsf/eng/home
Privacy Guide for Small Businesses: www.priv.gc.ca/information/pub/guide_sb_e.asp
Canada’s Anti-Spam Legislation: www.ic.gc.ca/eic/site/030.nsf/eng/j_00039.html
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Appendix 2: Top 10 Ways for Small Business to
Avoid Legal Troubles
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Appendix 3: Checklist for Creating and Using Contracts
1. Are the parties to the contract named? _____
2. Do the signing parties have the authority to enter the contract? _____
3. Are important terms defined and do you understand them? _____
4. Does the contract specify important terms such as,
timing, quality, payment provisions, and penalties? _____
5. Does the contract specify what happens if one party doesn’t do what they promise (Breach of Contract)? _____
6. How and when does the contract end? _____
7. Does the contract specify what happens in the event
of a dispute? How will it be resolved? _____
8. Are all the pages of the contract numbered? _____
9. Have all parties signed the contract? _____
10. Do you understand all the terms of the contract? _____
*This checklist is for information purposes only and is intended as a general guide. Connect Legal does not assume any responsibility for such information or for any loss or damage that may arise from the use of the information.
21
A NUANS corporate name search report is required by the federal and most provincial / territorial governments when granting new corporate names for use. The reports list similar existing corporate names and trademarks; they are used to determine the availability of a new proposed name. Ensuring that new corporate names do not create confusion with others is intended to protect Canadian businesses and consumers. Below is a sample of NUANS search for “ROMP ‘N ROAM Dog Walkers LIMITED”
Appendix 4: Sample NUANS Name Search Corporations
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Appendix 5: Sample Master Business License
23
Appendix 6: Sample Articles of Incorporation
24
5. Restrictions, if any, on business the corporation may carry on or on powers the corporation may exercise.
6. The classes and any maximum number of shares that the corporation is authorized to issue:
7. Rights, privileges, restrictions and conditions (if any) attaching to each class of shares and directors authority with respect to any class of shares which may be issued in series:
8. The issue, transfer or ownership of shares is/is not restricted and the restrictions (if any) are as follows:
9. Other provisions if any:
10. The names and addresses of the incorporators are:
These articles are signed in duplicate.
Full name(s) and signature(s) of incorporator(s). In the case of a corporation set out the name of the corporation and the name and office of the person signing on behalf of the corporation ________________ __________________________________________________________
Signature / signature Name of incorporator (or corporation name & signatories name and office)
________________ __________________________________________________________
Signature / signature Name of incorporator (or corporation name & signatories name and office)
________________ __________________________________________________________
Signature / signature Name of incorporator (or corporation name & signatories name and office)
** The format of the form was adapted for this toolkit from the original. You can access the original form with instructions at Service Ontario Website.
First name, middle names and surname or corporate name
Full address for service or if a corporation, the address of the registered or head office giving street & No. or R.R. No., municipality, province, country and postal code
Appendix 6: Articles of Incorporation Cnt’d
25
Appendix 7: Sample Business Name Registration