Congratulations! You have taken the leap to start your own business. This can be a challenging but rewarding time. Forum Law has business law expertise to help you through the legal requirements to make sure your business can be compliant and profitable.
I found the perfect place to start my new business, what next?
Before signing agreements, there are a few important considerations to have:
- Corporate structure determines the control and ownership of a business. The option of incorporating your company can protect you from the responsibilities of a corporation’s debts. Corporations are separate legal entities meaning they are capable of acquiring loans, entering contracts, and owning property. It is easier to access more capital at lower rates; and in the event of bankruptcy, shareholders will only lose up to what they invested.
- Negotiating a lease can have a great impact on profitability and the protection of the business. It is highly recommended to seek the help of a business law lawyer as leases are often complex and lengthy. Additionally, there are many options such as net leases, percentage rent leases, and gross rent leases; which vary by frequency of payment and coverage. Your lease should clearly describe the responsibilities of work and payments, as well as an appropriate exit strategy.
- Financing needs must be met to ensure that there is enough capital to support the business in the short and long run. There are many options for financing, and a business lawyer can help decide which is the best for you. A small business loan is the most common option and requires taking a debt-based approach. Additionally, the Canadian government offers a Small Business Financing Program which provides up to $1 million in financing under certain limitations.
I want to start this new business with a partner, but I want to be sure I’m protected in case things don’t work out. What should I do?
Starting a business can be a daunting task and it may help to have the support of a partner who can contribute effort and expertise. However, it is important to protect yourself in the event that the partnership fails. A unanimous shareholder agreement can be the most important aspect to starting your business with a partner; to reduce the risk of conflict and litigation.
A unanimous shareholder agreement often includes provisions concerning:
- Non-competition provisions
- Financing
- Pre-emptive rights
- Governance and management
- Shotgun provisions
These provisions can be enforceable through contract law, the “oppression remedy”, a court order directing compliance or the dissolution of the corporation. Prior to drafting an agreement, shareholders input must be considered as they will all be required to sign it. The conditions covered in a unanimous shareholder agreement will vary depending on your needs. A business lawyer can help draft an enforceable contract that will ensure your rights are protected.
My Landlord asked me to provide a personal guarantee, what is that?
A personal guarantee is a promise to make good on an obligation. In Alberta, a Guarantees Acknowledgement certificate is needed by law under the Guarantees Acknowledgement Act. This ensures that a personal guarantee is only effective once a lawyer signs the personal guarantee acknowledgment certificate along with the individual giving the guarantee. The confirms that a lawyer is satisfied with an individual’s awareness and understanding when entering guarantees. Often these guarantees are involved in lease agreements, corporate loans, unsecured line of credits, or small business loans.
If you are starting a business, it is recommended to seek professional legal advice to help you be confident in the choices you make today, for the success of your business tomorrow.
