A practical list for new entrepreneurs: Steps to take when opening a business

Never buy an existing business without first having a competent third party complete an appraisal of all assets, debts, liabilities, cash flow and physical structure. Liabilities include ongoing or past complaints to Human Rights Tribunals; Worker’s Compensation (claims/rate changes); Labour Boards/Tribunals.

Feel comfortable with the terms of any assumed contract to which you agree as part of the sale price: franchise agreements, membership contracts, merchant services, garbage and snow removal, telephone etc. Not comfortable? Negotiate before you sign.

Remember that current employees may have ‘continuity of employment’ set by provincial/federal Employment Standards Acts.

If the business is unionized, you will likely inherit the union along with the business. Consult a labour lawyer specializing in management rights before signing any document. Remain silent on the subject until you do.

• Sole Proprietorship
  • No distinction between the owner and business itself
  • Commonly used by new entrepreneurs
  • Easy to start
  • All business debts and liabilities rest with the owner
• Incorporation
  • Business owned by shareholder(s)
  • Extra paperwork
  • Initially more expensive to administer
  • Business is separated out from the owner and treated as an independent entity
  • Liability advantages may accrue under this option
  • Tax advantages may accrue under this option:
    • Lifetime Capital Gains Exemption
    • Small Business Corporate Tax Rate
    • Other
  • Must register business with government under specific rules
    • Recommended to discuss with accountant and/or lawyer whether to incorporate provincially or federally
      • To provincially incorporate, go to Canada Business Network and pick your province
      • To federally incorporate, see Science,Innovation & Economic Development Canada
      • Don’t be put off by seeming complexity – it may be worth the effort
• Partnership
  • Business owned by more than one person as partners
  • Mostly used by professional businesses such as law and accounting
  • Income divided according to partnership agreement
  • Partners jointly and severally liable for debts and liabilities

• Keep a separate bank account for your business no matter what structure chosen
• Business plan may be needed to secure many banking services that includes market research backing up your growth strategy:
  • Business loan
  • Line of Credit (for cash flow purposes)
  • Overdraft protection
• Unless a cash-based business, arrange for credit/debit/mobile card acceptance
  • ! Beware the reputation of credit/debit card merchant services companies. Many will overpromise, offer poor customer service, and hook you into an expensive multi-year contract

• Health (for you and any directors/partners)
• Building/Vehicular
• Liability
• Professional/Errors & Omissions (if required)
• Business Continuity/Interruption
• Life
• Other

• Legal – make sure you have access to legal advice; most successful businesses do
  • Have your lawyer review major contracts before signing
    • Corporate real estate
      • Purchase of land or buildings
      • Corporate leases
      • Zoning requirements
    • Partnership agreement (whenever more than one partner/owner)
      • Highly recommended to include ‘Right of first refusal’
    • Supplier agreements
    • Purchase of assets/stock agreements (if purchasing existing business)
  • Protect any patents/trademarks/logos before opening
• Accounting – good accounting advice is equally important as good legal advice
  • Get sign-off from accountant (CPA) on bookkeeping system/software to be used that will pass federal and provincial tax filing/employee deduction requirements

• Garbage collection
• Snow removal
• Other
  • ! Beware the reputation of those with whom you sign contracts.  Look for multi-year contracts, automatic roll-over provisions and exit penalties.  You could end up spending thousands of dollars should you need to leave the contract early

• Building
• Health
• Liquor
• Music
• Professional
• Regulatory (depending on location and sector)
  • Conduct a review of regulatory requirements.  Here are two examples:
    • Federal
      • (if business e-mails clients/customers)
        • CASL will regulate how you do this
    • Provincial
      • Ontarians, for example, need to comply with:
        • Accessibility for Ontarians with Disabilities Act
          • Building accessibility requirements etc.

• Determine systems and contracts needed to operate successfully
  • Telephone
  • Computer
  • Web Site
  • Security, both physical site and cyber
    •  ! Beware the reputation of those with whom you enter into contracts.  Look for multi-year contracts, roll-over provisions and exit penalties that can cost thousands of dollars should you need to leave a contract early

• Institute a system, whether paper-based or electronic, that reminds you of important commitments, especially those of a regulatory nature or having to do with statements, payments, receivables and tax
• Set up a system for reading/following up with mail/messaging (paper and electronic)
  • If you don’t have time, appoint/hire/outsource to someone who does – it could make the difference in your business’ success

• Job Description
  • This should be in writing to lessen misunderstanding over job expectations
• Interview
  • There are questions you may ask and those you may not
• Employment Contract
  • Should be in writing and signed (reviewed by a lawyer for completeness)
• Payroll System for paying employee, remitting EI, Workers Comp, CPP etc.

• Know how EI and CPP apply to your business
• Create an employee handbook and/or set of work policies
  • Code of conduct
  • Performance review
  • Policies on harassment, violence etc. (can differ according to province)
  • Privacy policy
• Understand implications of provincial/federal employment standards (can differ by sector and place)
• Beware of human rights complaints and what you can do to reduce exposure
• Understand workers compensation regimes and OH&S requirements
• Train when needed – you may require training and/or certification according to sector, place, and use of materials.  For example, forklift training, working at heights, WHMIS/GHS etc.

• Resignation/Termination
  • Must be in writing (make sure it’s in writing even within the first 90 days!)
  • Giving notice vs. payment in lieu
  • Employment standards’ requirements
  • Record of Employment (ROE) and EI
  • Severance
  • Know when to seek legal advice

• CPP/QPP requirements
• Succession planning