Corporate Structure Law 101

Michelle Chan, a startup lawyer with over 10 years experience specializing in corporate law, spoke at a webinar earlier this month covering steps startups will need to follow when setting up a new business venture. Michelle loves working with entrepreneurs and helping people make their dreams a reality by guiding them to make the best decisions for their business.

Here, we cover 3 of the most important areas you’ll need to cover when starting your new venture:

  1. Corporate Structure: What type of company should you set up?
  2. Share Structure: What are the best options for your business?
  3. Investment: Get Investor Ready, what are the best investment options for your company?

Corporate Structure: What type of company is best for you?

You have a new business idea you believe in, everything is in place and you’re ready for the official and legal setup process. Whether it be a new product, service or software you’ve designed, deciding on a corporate structure is the first thing you need to be thinking about when it comes to making it official.

You’ll need to determine which of the following options is the best route for you:

  • Sole Proprietor

Here, there is no separation between you and your business in terms of liability. Your taxes and expenses are the same as the businesses taxes and expenses. If you’re a freelance designer for example or you are doing some flexible work for the first time on your own, this could be a good option for your company.

  • Partnership

Often people in the same industry or with complementing attributes will decide to start a business together. If you have someone you’d like to work with, this option shares the liability and identity within your business.

  • Corporation

If you want more separation between you and your business, you’ll need a corporation. This is probably the most common and popular option for ambitious startups who want to build their business on a large scale and really make a difference. There are required criteria to qualify for eg. 25% of the directors must be Canadian (except in certain territories).

There are also options such as a Canadian Controlled Private Corporation (CCPC) for companies majority controlled by Canadians. With a CCPC, there are benefits including a lower tax rate and R&D tax credits so it’s definitely worth finding out if you’re eligible!

We know decisions like this are important for you and your business so it’s our job to use our expertise and guide you to make the right ones.

Click here for part 2 of this blog series on Share Structure.

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