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

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

While the following list does not cover everything, it does provide a basic overview for anyone wanting to buy or start a small business. It assumes technical competence on the part of the entrepreneur with regard to the goods or services he will supply. It also assumes a lawyer and accountant will be consulted when appropriate.  If you are the entrepreneur, there are three main subtexts you will need to consider depending on your situation: 

Are you buying an existing business?

Are you starting from scratch?

Will you be employing or hiring workers? 

Each of these will require special consideration.

Starting out by purchasing an existing business?

 

Evaluation

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.

Assumed Contracts

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.

Current Employees

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

Unions

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.

 

Starting out from scratch?

 

Choose the type of business structure that suits you best (most common types)
  • 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
  • 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
Banking/Financing/ Payment Acceptance
  • 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
Insurance (see broker)
  • Health (for you and any directors/partners)
  • Building/Vehicular
  • Liability
  • Professional/Errors & Omissions (if required)
  • Business Continuity/Interruption
  • Life
  • Other
Professional Services
  • 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
Non-Professional Services (examples)
  • 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
Licenses/Permits/Certificates/Regulations (examples)
  • 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.
Electronics/Telecommunications/Security
  • 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
Time Management/Calendaring System/Mail Response
  • 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

 

Employees

Once you take on or hire your first employee, your world will never be the same – for better or worse.  Without employees most businesses will find it difficult if not impossible to grow.  Not to worry:  Most employees, when treated fairly, will do their best to help you succeed.  By considering the following issues and setting up your business properly from the start, you can increase the chances your employees will help you grow rather than be a source of discouragement.  A CFIB membership allows a business to use CFIB’s Business Resources Counselling Services to better understand employment obligations and best practices.

 

Prior to Employment
After Hiring
  • 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.
Ending Employment
  • 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
Retirement
  • CPP/QPP requirements
  • Succession planning

 

While the above is not a comprehensive list, it is a good start. 

Got questions?  Interested in membership with CFIB? Call a Business Counsellor.