Starting a small business requires more than just having a great idea – it’s a big undertaking that requires some careful planning.
This blog post will give an overview of some of the key steps you should undertake – ideally with the help of an experienced lawyer – to ensure your small business gets off to a good start.
Develop a business plan
A business plan is an invaluable tool that can help you keep your business on track, and should include things such as a timeline with goals, financial projections, and your overall business approach or strategy.
Having a solid business plan can also help you secure financing from banks and other prospective investors. You should therefore create a plan that takes a long-term view, with enough flexibility to adapt to unanticipated changes. A well-developed business plan should also include:
- A mission statement, which helps establish a business’ reason for being;
- Milestone timeframes with projections for one, two, and five years down the road;
- Realistic forecasts for your finances;
- A general strategy for promotions and marketing;
- An identification and understanding of key competitors; and
- Contingency planning.
After creating a business plan, you can then use it to measure your success or more quickly identify things that might need a course correction.
Choose and register a business name
Registering a business with the provincial government is an important step for any new business (both legally and symbolically.) Registering your business name ensures your new brand is protected, and no one else is already using it.
Note that in Ontario, you are also required to register a business name in any of the following situations:
- For individuals, if the name of the business is different than the registrant’s own full legal name;
- For corporations, if it is operating under a different name than its legal corporate name; and
- For partnerships, if your business is operating under a name that is different from the full names of all the partners.
Before registering a business name, it is very important to conduct a thorough search of any names you’re considering to ensure they have not already been taken. Through Service Ontario, for a nominal fee, you can conduct a business name search for this purpose; once you have found a name you can use, you can register it online, which will give you the right to that name for 5 years (beyond which you will need to renew the registration.)
Structuring your business
There are three main types of legal structures your business can take. Perhaps the most common for small businesses starting out is the sole proprietorship, which leaves the owner in full control, with any income generated by the business attributed to the owner and characterized as business income. The main risk of sole proprietorships is that since they do not have a separate legal existence distinct from their owners, the owners assume all risks with the business and are personally liable for any debts owed by the business.
A second structure is known as a partnership, formed by two or more people. Similar to sole proprietorships, partnerships do not have a separate legal status separate from the partners themselves, and so partners remain personally liable for any debts or other obligations incurred by the partnership.
The third main type of structure is known as a corporation, which creates a separate legal entity that can earn profits (and be taxed) and separates legal liability from the owners. Note that there is considerably more paperwork involved in setting up and operating a corporation as compared to sole proprietorships and partnerships. For this reason, many business owners choose to start off as either sole proprietorships or partnerships and only convert their business into a corporation when the benefits of that structure begin to outweigh the costs.
Note that for certain professions, such as doctors, lawyers, and accountants another option is a professional corporation, which is a special type of corporation with slightly different rules, particularly with respect to liability.
Register with the CRA
Once you have registered your business name and received your business licence and number, this will help you interact with the Canada Revenue Agency (CRA). Once set up with the CRA, you will also need to sign up for a business account in order to ensure business functions such as payroll and collecting and remitting the Harmonized Sales Tax (HST) are completed regularly.
Do you need any licences?
Depending on the nature of your business, you may also require provincial or municipal permits or licenses. Examples include liquor licenses, parking permits and construction permits.
Financing your small business
Securing the resources your need to start your business is often the biggest challenge new business owners face.
In most cases, your personal assets will be your first source of money. In many cases, however, this alone will not be enough to get your business off the ground. Accordingly, there are a number of potential financing sources to consider.
- Banks: Banks and other financial institutions are an obvious choice. Be aware, however, that the ease with which you can get a loan approved will depend on important factors such as your credit history.
- Government: Federal, provincial and municipal levels of government have an array of programs in place intended to help businesses and including everything to grants and loans, guarantees, credits and wage subsidies.
- Family and friends: There may be an old adage that family and business shouldn’t mix, but the reality is that those who trust and care about you may be better positioned to take a risk on your new venture.
- Private sector financing: Private investors are often on the lookout for promising investments and can offer different forms of financing, ranging from debt or equity financing to venture capital.
Regardless of the financing source you choose, having a sound business plan will go a long way to helping you secure approval.
Contact the Corporate Lawyers at Tierney Stauffer LLP in Ottawa & Arnprior for Advice on Business Law Matters
At Tierney Stauffer LLP, we provide comprehensive and forward-thinking advice to our business clients, no matter the size of the operation. We can help advise on everything from developing a business plan to registering a business name. Our business lawyers have extensive experience in business law matters, from real estate to licensing and business succession. Contact us at 1-888-799-8057 or contact us online to arrange a consultation today.