ERIC - Case Comment: Pace v. Hymas: Termination of Tenured University Faculty: Financial Exigency and the Burden of Proof in a Substantive Due Process Claim., Journal of College and University Law, 1987
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Peer reviewed only
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Peer reviewedERIC Number: EJ354222Record Type: JournalPublication Date: 1987Pages: N/AAbstractor: N/AReference Count: N/AISBN: N/AISSN: N/ACase Comment: Pace v. Hymas: Termination of Tenured University Faculty: Financial Exigency and the Burden of Proof in a Substantive Due Process Claim.Dixon, Thomas M.; And OthersJournal of College and University Law, v13 n4 p417-28 Spr 1987An Idaho court case in which a tenured faculty member with seniority was dismissed for financial exigency became two trials, one concerning the university's burden of proof for financial exigency and the other concerning deprivation of the faculty member's due process. The decisions are examined. (MSE)Descriptors: , , , , , , , , , Education Level: N/AAudience: N/ALanguage: EnglishSponsor: N/AAuthoring Institution: N/AIdentifiers - Location: IdahoSTARTING A BUSINESS
Basics for
Mike Volker
STARTING A BUSINESS
Starting a Business (Canadian context)
Anyone can start a business. A business can best be described as any activity designed
to generate a material transaction (e.g. cash exchanged for something received). Some
people run their businesses as personal businesses - i.e. they are synonymous with that
business. Any business income or loss is reported on a personal basis to the tax
department and not by the business. Others incorporate companies in which case they detach
themselves from the business in a legal and tax sense.
This may be your ticket to immortality.
Legal Forms of Business
What legal form should my business take? There are a number of& legal formats for
establishing a business. However, in the simplest terms there are only two formats: Incorporated
and Unincorporated. In the case of an unincorporated business, you as a person are
the business. It's like having a separate bank account which you use for the transactions
of your business. All you have to do is to &hang out your shingle&, i.e. come up
with a business name (or simply use your personal name), register it with your local
government (to get tax numbers and any necessary business licenses) and start working on
getting customers. Usually this form of business is referred to as a Sole
Proprietorship. It is the simplest and least expensive format. You, as the owner,
receive all the profits and you assume and accept all the risks personally. Really simple!
A Partnership is an extension of the sole proprietorship and is similar to a
sole proprietorship except that there is more than one person involved. In this case, a
partnership agreement spells out the sharing of risks and rewards among the parties.
Profits and losses as well as liabilities flow through to the individual people involved
as spelled out in said agreement. This is an arbitrarily determined legal partnership.
Limited Partnerships may be formed when several people wish to invest in a business but do
not necessarily want to run or manage (or take on risks associated with) the business. In
this case, limited partners are liable for debts only to the extent of their original
contributions of capital. In terms of what you need to do, i.e. licenses, tax numbers,
name registrations, etc. - the best bet is to check with a business advisory service (e.g.
a law firm, government office, etc.) because the requirements will depend on where you do
business and perhaps what kind of business it is. Requirements will vary from city to city
and province (or state) to province (or state).
Often, professional firms (law firms, accounting firms) are set up as partnerships but
with a special form of partnership limiting the liability (known as an LLP)
of the partners. In B.C. for example, until April 2004, active partners in a partnership
in B.C. were personally responsible for the liabilities of all the partners and the
partnership itself. An LLP is a partnership in which each partner is responsible only for
his or her own liabilities. It makes partners more fully accountable to their clients or
customers, and ensures all partners can engage in their business without the concern of
having their personal assets at risk, unless there is negligence or wrongdoing. Now, LLP's
can be formed in B.C. by almost anyone under B.C.'s updated Partnership Act.
Incorporation is the preferred route for most people - especially when several
investors or founders are involved and especially if the aspirations of the owners are
such that significant growth (and risks) are mandated.
Other, more subtle forms of business format, entail Joint Ventures, Franchising,
Dealerships, or Licensing arrangements. However, in each case it will be either you
personally (or a company which you incorporate) which becomes the participant in one of
these alternate forms. In a Joint Venture arrangement, you work with another company and
an agreement between the parties spells out the obligations and rewards of the
participants. This format might apply if you take your idea to a larger, established
company and you access their capital and talent and you supply your ideas or designs.
Instead of starting a business from scratch, you can buy a Franchise - i.e. the right to
use an established business name and model in a particular geographical area (e.g. a
restaurant). This eliminates many of the start-up risks, but will require you to make up
front payments to the franchisor and will require you to work within the guidelines of
said franchisor. When operating a dealership, you act as an agent for other companies -
selling their products under your name or in your store. Dealerships can be incorporated
or unincorporated.
Other Options
An often unconsidered option for the entrepreneur is that of a Licensing Agreement. In
this case, you would license another company to take your innovation or idea to market in
exchange for a fee or a royalty stream. This is an ideal option if you are not interested
in running a business or if you plan to have a one-shot product wonder. Why go through all
the rigors of owning and running a business when you can piggy-back onto an already
established venture. There are many companies who need your product! Large companies are
always on the lookout for entrepreneurial innovations or businesses to acquire. Think
about this as a viable option. Look at it this way - it is a lot less risky to get 5% off
the top (i.e. 5% on someone else's sales) than it is to try to generate a 5% bottom line
(and worry about all the expenses in between!).
A Home-Based Business
You can set up an unincorporated business which you run from your home (or from your
briefcase) just by saying so. Technically, you don't need to get permission (you may,
however, need a license depending on the type of business). You just do it. Give yourself
a name (or use your own name), generate some interest in your products or services (do
some form of advertising, even if word-by-mouth), keep a few record books, and have some
form of game plan.
Should You Incorporate?
What are you really doing when you incorporate? You are creating another taxpayer!
Normally, governments tax their citizens and their corporations. If a business is not
incorporated and set up as a new taxpayer, all matters pertaining to taxation and
liability rest with the owner of that business. Incorporation is a formal filing procedure
with a legal jurisdiction such as the Province of British Columbia. Lawyers will
incorporate companies for a small fee, usually in the $300 to $1000 range. Of course,
there are also government fees which are levied for doing the corporate registration but
these are quite nominal and are typically in the $300 to $500 range, depending on where
you incorporate. You can also do it yourself but it is a good idea to get some
professional help to make sure it is done properly and so that you know what is being done
Businesses that have not been incorporated can always be incorporated at some later
date. The decision as to whether or not to incorporate depends on a few key questions such
Is this a modest personal side-line or will it be your life's work?
Will there be more than one owner of the business? (E.g. partners, investors)
What are the personal liabilities issues (e.g. financial credit, product liability)?
Are there personal tax advantages to being incorporated?
Are there business (or market) advantages to being incorporated?
Can you justify the extra expense and paperwork associated with being incorporated?
Another question that should be addressed is that of timing. When should a business be
incorporated (if ever)? It might be a good idea to wait with incorporation until certain
milestones or events trigger the need to be incorporated. For example, if you are testing
the water with a business concept and you are not sure if it will really work or not, you
can save some time and expense by doing your product and market development work on your
own account and then proceeding with incorporating only when you are convinced that the
business makes sense to you.
It is suggested that, no matter what, you seek the counsel and advice of some experts
in this field. A good accountant can advise you on various matters pertaining to taxation.
Perhaps a good personal financial planner would also be consulted. A good lawyer can
advise you on your legal obligations possible personal exposure to liabilities. This may
sound expensive, but you can usually get an initial meeting with lawyers and accountants
on a &complimentary& basis. After all, they are looking for new clients all the
time and they general will invest an hour or two of their time with you in the hope that
it will lead to a long term relationship. Talk to others who have done it. One problem
with people starting up is that they do not know what questions to ask. For example, how
are your shares held? Have you considered family participation? What about off-shore
trusts? There is a tendency to not think about questions like &How can I minimize the
amount of tax I have to pay if I sell my company for a million dollars?&& Sure,
we tend to think that would be a nice problem to have. But, now is the time to give it
some thought - before the million dollar gain!
Benefits of Incorporating
When you incorporate a company, remember that all you are really doing is creating a
new legal entity -& i.e. a new, taxpaying corporate body with its own
&soul& and presence.& Incorporating a company offers you many advantages,
even if you are a one-person business. Some of these advantages are:
personal liability protection (to a large degree)
substantial tax advantages& (especially when you sell a business)
a high degree of flexibility in personal financial planning
greater control in transferring ownership
easier to bring in outside investors and other partners
a company survives human death (i.e. may last indefinitely)
&Protecting Your Personal Assets
This is the number one reason why many people incorporate. In case of a lawsuit or
judgment against your business, no one can seize your personal assets, e.g. your house,
car, boat, bank accounts, etc. unless you have pledged these as collateral. Incorporation
is the best protection for personal assets that you can get in business. However, there
are other liabilities which you may not be able to avoid by incorporating. For example, if
you do not remit certain taxes, you could be held liable as a director of the company.
Note that shareholders are not necessarily held liable - only the director(s) and they are
not necessarily the same person although in startup companies usually the shareholder(s)
and director(s) are one and the same.
A Possible Tax Shelter
There are many more tax options available to corporations than there are to
proprietorships or partnerships. You can establish various pension, profit-sharing and
stock option plans which are favorable to the owners of the corporation. For example, in
most cases, a corporation can deduct your life and health insurance premiums whereas you
could not do this personally. You can also pay salaries to family members thereby reducing
your family's overall tax burden. Furthermore, family members can be shareholders (even
through off-shore trusts or tax shelters) and thereby benefit from lower capital gains
taxes when they sell their shares. In Canada, owners of a Canadian Controlled
Private Company (CCPC), can sell their shares and enjoy the
benefit of zero taxes on the first $750,000 of capital gains!
Small companies are taxed at lower rates. For example, a CCPC pays less than 22% in
corporate income tax on the first $200,000 of net profit which is about half the
&big& company or personal rate. Therefore, if a profit is made in a CCPC and if
the CCPC's owners do not need this profit to be paid out to them, it can be re-invested by
Other Aspects to Consider
A corporation wishing to raise capital is more attractive to investors who can purchase
shares of stock allowing you to raise money without incurring debt and thereby avoid
interest payments.
A corporation's capital can be expanded at any time by issuing and selling additional
shares of stock.
Shares of a corporation can be easily distributed to family members and others -
including other companies. That makes estate and family planning a lot easier.
Public or Private Company?
When for-profit companies are incorporated, at least in Canada, they are incorporated
as Canadian Controlled Private Companies (CCPC). (Of course there are also other legal
entities such as non-profit charities and societies which may be formed.) Companies, as
they grow and expand, may become &public& companies, i.e. have their shares
listed on a stock exchange to be traded by members of the general public. The possibility
of becoming a public company is not something which one needs to be too concerned about
when incorporating initially except that care should be taken to ensure strict compliance
with the Act to avoid great legal expenses and headaches later on. Again, good legal
counsel is recommended. I know of one case where a company was incorporated by the
founders to save a few dollars in legal costs but when it was ready to go public, its
records and share structure where a mess which first had to be cleaned up (at great
expense and time) before the company could be cleared for going public!
Incorporation Documents and &Articles&
Companies, especially the financial aspects such as share issuances and ownership, fall
under the scrutiny of legislation which exists in whichever jurisdiction they are
incorporated. The provinces as well as the federal government each have passed
&Acts& of legislation for this purpose. In B.C., the Company Act
(replaced in March, 2004) sets forth many details relating to the operation and governance
of incorporated companies. These constitute a set of rules by which one must abide.
Additionally, when you incorporate a company, you will adopt a set of
&Articles&, or rules, by which you must abide. This entails several pages of
documentation and covers matters relating to the issuance, transfer, purchase and sale of
shares, rules pertaining to the calling of meetings, definitions of decision making
powers, and many other aspects of corporate governance. These rules are useful insofar as
they clearly set out what companies may or may not do. Often, the shareholders of a
company will enter into a &shareholders' agreement& among themselves and this
may further define certain details about how a business will be run and how ownership
issues will be handled. However, such agreements are optional whereas the articles of
incorporation are mandatory. It is a good idea to fully understand these articles and to
become knowledgeable about corporate governance matters. The B.C. Company Act was
recently replaced by the new Business Corporations Act, SBC 2002, c. 57 that came
into force on March 29, 2004, introducing both substantive and procedural changes in the
incorporation, organization and activities of all British Columbia companies and the
registration and obligations of all extraprovincial companies.
In a B.C., you need to register with the provincial Registrar of Companies (see below). A registration package may be obtained from any
government office or from the website. It may take a week or two for the name search and
registration.&
In Canada, you can incorporate federally under the Canada Business Corporations Act
(the &CBCA&) just about as easily as incorporating provincially. Federal
incorporations are handled by
What is best? The quick answer is: &Federal&. Why? Because it costs only a
little bit more (around $100), you get your company's name protected across Canada (not
just in one province), there is more flexibility (although it may be harder to get
clearance) in choosing a name, and perhaps most importantly, the CBCA statutes are more
closely aligned with those in American jurisdictions and hence it may be easier to conduct
business with U.S. entities (e.g. investors, partners, etc). Also, insofar as British
Columbia in particular is concerned, there are many variations among companies with
respect to the &articles of incorporation&, meaning that greater care must given
to understanding these. Federal companies are governed by statutes and need not have
extensive articles. In B.C., for example, it is always necessary to obtain shareholder
approvals on certain matters which could cause logistical delays. It really only makes
sense to restrict oneself to a provincial incorporation if you plan to keep the company
small, closely held (e.g. you plan to be the sole shareholder), do business only in B.C.,
do not need cross Canada name protection. If you are a federal corporation, you could then
use your name in the Canadian internet domain name system, e.g. yourname.ca. If you are a
B.C. company, you'd have to use yourname.bc.ca. A company such as a personal holding
company (for purposes of making investments in other firms) would be a good example of a
company that you might incorporate provincially. If you're not sure, go with the CBCA.
Note - you will still need to get provincial registrations in those provinces where you
intend to do business (so that they can get you to collect sales and other taxes), but
that's not a big deal.
There are some other major factors which might affect where one incorporates. One of
the most important relates to corporate governance, i.e. the directors of the company. In
B.C., a majority of the directors of the company must be Canadian residents with at
least one director also being a resident of B.C. This is the same under Federal rules. If
you incorporate in the Yukon, then you do not need a majority of Canadian resident
directors . This is why this jurisdiction may be favored by foreign companies doing
business in Canada.
Corporate Jurisdiction
In Canada and the USA, companies are generally incorporated in a province or state. In
many countries, incorporations are handled at a national level. If you are a Canadian
company and you intend to conduct a substantial amount of business in other countries, you
may be advised to incorporate in other jurisdictions. There may even be some corporate tax
advantages in so doing because of international tax treaties which exist among trading
nations. Obviously, this is an area in which some competent legal and accounting advice
will serve you well.
If you are considering the USA, you could check with a USA incorporation specialist in
conjunction with your own legal advisor. Some information on incorporating in the USA can
be found at .
With respect to Canadian (Federal or Ontario) incorporations, a good (but inexpensive)
law firm specializing in corporate matters is the best way to go about this. Check with
other entrepreneurs in your area for referrals.
What's in a Name?
There's often confusion between corporate names, business (unincorporated) names,
trademarks, product names (or brands) and other names such as internet dot-com domain
names - not to mention the jurisdiction where a name is registered, incorporated or
trademarked. Confusion among names is common in the marketplace. Sometimes similar names
are created unintentionally. Sometimes the similarity is intentional. This discussion
deals mainly with the selection of an incorporated company name although many of these
ideas are applicable to an unincorporated business name.
How should you choose a name for your company? You are going to have to live with a
name for a long time - especially if you advertise and promote the name heavily in which
case it will take on value. For example, look at the value in a name such as
&Kleenex&. A corporate name should be carefully chosen. In some legal
jurisdictions, you may be constrained with a choice in names. In B.C., the rules are
rather specific: The first part of your name must start with a distinctive non-descriptive
word or phrase, for example a geographical location, your name, a made up word or phrase,
or initials. The second part of the name must describe the type of business, e.g., shoe
store, investments, technology. A third component is called the corporate designation, for
example Limited, Ltd., Corporation, Corp., Incorporated, Inc. (If you are registering a
sole proprietorship or partnership, a corporate designation is not used.) A name that
would meet the criteria would be Bowen Technology Corp. The rules under the CBCA are
different. You could, for example, incorporate under a name like RDM Corp. Exxon Corp.
would, interestingly, not be approved in B.C. (But, it could be registered in B.C. if
incorporated federally!).
As for the choice of name, here are a few suggestions: Choose a unique name (but not
one that's hard to remember), one that is not likely to be &accidentally& copied
elsewhere (note - having a corporate name does not automatically give you trade mark
rights). It will also differentiate you from your competitors and should be something that
your customers will remember. You could incorporate a company called Easytote Luggage
Corp. but if another entity has trademarked the name &Easytote& in the USA, you
may have a problem. Avoid generic sounding names like Microtek Computers Inc - they are
too easily confused with others and too easily copied. I have seen many examples of
technology companies in different parts of North America with exactly the same name - by
coincidence! You wouldn't want to spend a lot of money promoting a name only to have to
change it or find out that another party is deriving the benefit of your promotions.
Faddish names are also not a good idea. What's &in& today may be &out&
tomorrow. Recently, Internet names with &dot-com& in them are fashionable. But
will this popularity last long? Names that endure the test of time are good. Names that
are easy to remember are also good. Names with some techy-sounding words may appear to be
easy to remember but are often confused with other names or forgotten...e.g. now was that
Microcomputers or Microsystems Corp? Short, simple names are also better than long names.
Completely fabricated names like Xillix, Xerox, Exxon are good because they are very
unique, simple, and can be remembered (hopefully!). Proper names also lend a ring of
credibility and respectability, e.g. Hewlett-Packard Corp. Finally, don't restrict
yourself too much. If you call yourself the Pinnacle Pager Corp., you may find that the
name is no longer appropriate once pagers have become obsolete. If you do feel strongly
about using a word like &pager&, then at least select a very distinctive first
name. Then, if you do need to change the name, it would now be something like Pinnacle
Wireless Corp, and not too much of your investment in the name would be lost. As for
getting ideas - think &out of the box&. Ask some kids. Look up some latin words
(caution: when you are picking a name give some thought to international use. Avoid
picking an English name that may sound offensive in Japan). Eat some alphabet soup for
lunch and good luck!
Speaking of names, it's a good idea to identify yourself and your business by getting
some . Having a well designed business card is
very important. Never leave home without a supply of cards.
Share Classes and (i.e. Capital Structure)
One of the details of incorporation, covered in the afore-mentioned articles, relates
to classes of shares. A company has the right to define its &capital structure&
in many different ways, i.e. it can define various classes and types of shares which it
will issue. For example, companies usually issue one class of shares, namely
&common& shares. These shares are precisely that: &shares& of
ownership. Each share entitles shareholders to one vote at shareholder meetings and each
share entitles its holder to one share (i.e. 1 divided by the number of shares issued in
total) of the corporate profits. You may have heard of &Preferred& shares. Such
shares have certain &preferred& rights. For example, they might entitle the
holder to a fixed dividend rate. They may also entitle the holder to a conversion into
common shares (at a given ratio or formula). They can be used to give investors special
rights or additional security in order to attract their investment dollars. Sometimes
different types of shares, common or preferred as described as Class A or Class B (or
Class C...etc) shares. There are no universal definitions relating to Class A vs Class B.
For example, one company's Class A shares might be quite different from another company's
Class A shares. The different classes permit companies to assign different rights to the
shareholders of these securities, e.g. different classes may have different voting or
liquidation rights.
Startup Checklist
The following checklist will give you an idea of the essential steps that you have to
take to formalize your business - whether incorporated or not. This checklist is
particularly applicable to companies planning to operate in British Columbia, but the
steps are almost identical in other jurisdictions. You may (correctly so) get the feeling
that you will be working for the government. It's actually not as bad as it looks. In
fact, until you actually start doing business (e.g. selling something), you don't need to
bother with most of this. You can operate under your own name, keeping track of all your
expenses for tax purposes. If you need some time for doing product development or design
work or just working on the details of how your business will operate, you can afford to
wait until you are ready. In any event when you are ready, you can make this process easy
for yourself by obtaining the services of a good and hopefully inexpensive business
lawyer. This should not be too expensive (around $1000 in legal fees) and you'll have the
peace of mind, hopefully, that the paperwork has been done properly. However, you can save
a few dollars by doing some of the legwork yourself. Beware, though, rules and
regulations are always changing and what you'll find in this write-up may not necessarily
be up-to-date.
Here's how:
1.Registering the Business - You need to register a business name with the
provincial Registrar of Companies unless you intend to operate under your own name
without incorporating. A registration package may be obtained from any government
office. (It may take a week for the name search and registration). A good place to start
is with B.C.'s .
The Registrar also looks after incorporating. Contact information:
Registrar of Companies
2nd Floor, 940 Blanshard Street, Victoria, BC
PO Box 9431 Stn Prov Gov
Victoria BC, Canada V8W 3E6
Tel: (250) 387-7848 Fax: (250)356-0206
From Vancouver call: (604)775-1041
2.Business License - If you locate your business in an incorporated municipality
(city, town, village or district), obtain a business license from the municipal business
license office. (Check the blue pages in the telephone book). This may be important in
certain cases, especially when selling to the public.
3.Land Use and Zoning -& Check with municipal (or regional district)
authorities to ensure conformity with zoning and building regulations. This is generally
not a big deal and you may be able to skip this step.
4.Provincial Sales Tax (Social Service Tax) You must register with the Consumer
Taxation Branch, Ministry of Finance and Corporate Relations, and collect social service
tax on your taxable sales and leases if you engage in any of the following activities:
virtually any type of retail sales or services. The Consumer Taxation Branch will issue
you a Certificate of Registration and provide information on your responsibilities.
Consumer Taxation Branch
1061 Fort Street
Victoria, BC V8V 3K5
Tel: (250) 387-0656
500-605 Robson Street
Vancouver, BC V6B 5J3
Tel: (604) 660-4524
5.Federal Goods and Services Tax (GST)& If your annual revenue from the sales
of taxable goods and services will exceed $30,000, you are required to register for GST.
If you are below the $30,000 figure, you need not register. If you do not register, you
will not charge GST to your customers and you will not be able to receive a refund
for any GST paid on any of your business purchases. For more details contact:
Revenue Canada Excise
British Columbia/Yukon Regional Office
201-4664 Lougheed Hwy.
Burnaby, B.C. V5C 6C2
Tel: (604)666-4664 Toll-free: 1-800-463-6737
(Also check Industry Canada's Startup Assistance website
- includes registration, info, help, etc)
6.Business Number -
When you register with Revenue Canada for any one of the
following four business accounts: corporate income tax, import/export, payroll deductions
and the goods and services tax (GST) - you will receive a Business Number (BN) to identify
you to Revenue Canada.
7.Workers' Compensation Board (WCB) - Most businesses (&80%)& in British
Columbia are required to have compensation coverage. The overall responsibility for
complying with the Workers Compensation Act and WCB Regulations and for paying assessments
rests with you! Contact:
4514 Chatterton Way
Victoria BC, Canada V8X 5H2
Tel: (250) 881-3400 Fax:(250) 881-3481 Toll Free: 1-800-663-7593
6300 River Road Richmond, BC
PO Box 5350
Vancouver BC, Canada, V6B 5L5
Tel: (604) 244-6182 Fax:(604) 244-6377
Toll Free: 1-800-661-2112
Victoria (604) 380-3416
Vancouver (604) 273-2266
8.Labour Requirements -& If you are hiring employees or subcontracting for
labour, you should know the requirements for minimum wage, statutory holidays and other
employer/employee rights. For details, contact the Employment Standards Branch office of
the Ministry of Skills, Training and Labour (see blue pages of the telephone book) or:
Employment Standards Branch
Suite 400 - 3960 Quadra Street
Victoria, BC V8V 1X4
Toll Free: 1 800 663-3316 Fax: (604)387-1200
201-865 Hornby St.
Vancouver, BC V6Z 2G3
Tel: (604)660-4000 Toll Free in BC: 1 800 663-3316 Fax: (604)775-1983
9.Other Regulatory Matters -&
You must be aware if any regulatory bodies or
agencies which may affect your business. For example, does your product need CSA (Canadian
Standards Association) approval before you are allowed to sell it? What about FCC (Federal
Communications Commission) approvals for the USA (most computer and electronics products
cannot legally be exported to the USA without such approvals)? What about FDA (Food and
Drug Administration) requirements in the USA. And then there is the CE mark which is
required for most consumer sales into the European Community. What about environmental
concerns? The best way to find out about all these is to do a little networking with other
business people. Join various groups (like a Chamber of Commerce) or an industry
association. You owe it to yourself to identify all the hurdles over which you have to
jump before you can be successful.
10.Business Records -& It's a good idea to set up an orderly record and
accounting system. You should contact the nearest Revenue Canada office for relevant&
forms, information on expense deductions, interpretation& bulletins and income tax
return forms. There are many good personal computer software programs which will get you
started (e.g. Simply Accounting by Computer Associates or Quickbooks by Quicken). For
certain businesses, e.g. manufacturing or restaurants specialized software and systems
have been developed. Check out what your peers and competitors are using.& Using the
services of a qualified accountant is a good investment which will save you much time and
potential grief later on.
Important note - even if you incorporate a business, you may still be personally
liable for ensuring compliance with some of the above steps, especially those pertaining
to taxation. Like it or not, you are not only a taxpayer but as a business person you are
also a tax collector and if you fail to do so properly, you will be personally liable. In
Canada, messing around with the tax authorities can carry a stiffer penalty than crimes
like theft and murder!
More Checklists...
Well, now that you've done what the government and the bureaucrats want you to do, what
should you do for yourself? Here's a brief personal checklist:
1.Pick a business name
2.Structure your business
3.Operationalize the business
1.Pick a business name - Perhaps the most important thing to get started is to
pick a business name. This will also have the psychological impact on you of &Hey, I
really am in business. Now I better do something!& The choice of a name is very
important because it will stay with you a long time and after a while, the name may become
vary valuable (e.g. what's the value of &Coca-Cola&?). See section above on
2.Structure the Business - You have to decide what legal form your business will
take. The choices are basically: sole proprietorship, partnership, or incorporated
company. Many companies start of as a sole proprietorship and then later become a
partnership or incorporated company. The main difference between a sole proprietorship and
a partnership is that instead of being on your own, you are bringing in other partners,
i.e. owners, to work with you. Except for very simple businesses, it may be best to
incorporate. Incorporation is usually the preferred choice when more than one owner is
involved. There may be some minor tax or other advantages to a partnership format, but you
should explore this with both your lawyer and tax accountant.
If you incorporate, you will need to determine how many shares to issue (and to whom).
the officers and directors of the company. It is at this point in time that you should
also think about the future. For example, should your spouse or children be shareholders?
Should any shares be held by a family trust or by an offshore company to save on future
taxes? How are the shares to be voted? What's a &fair& distribution of shares?
Usually, people do not think about these points until it is far too late. Again, some
experienced mentorship is strongly recommended (see article on &structuring& a company).
As soon as you involve other people, be it a partnership or corporation, you should
give some thought to partnership or . These
determine who can do what - how profits are shared, how ownership can be changed, how the
business will be run and how profits will be shared and distributed as well as to
obligations if the business gets into any difficulties (like cash flow problems). Check
with others as to their experiences with partners and agreements. There is no such thing
as a &standard& agreement. Each case is unique and will depend on your
preferences, style, and objectives. You really need both peer input as well as legal
opinions on this point. When you start this process you often don't even know what
questions you should be asking. This is where some experienced mentorship will be helpful.
3.Operationalize the Business - So, let's get on with it. You've incorporated
and you have a name. What else is needed? You will need business cards, letterhead, an
address, telephone, fax, email, website, bank account, advisors (lawyer, accountant,
mentors), forms (sales orders, expenses, etc), filing system, and possibly trademark
registrations (or patents) to name a few. A trip to your local office supply warehouse
will get you going. All you really need is a state of the art computer and some high
quality paper and you can print your own business cards and letterhead (in the old days,
you'd have to invest in a stockpile of these only to find out that the address or phone
number needs to be changed a few months later).
Beyond these basics, there is the whole question of &the system&. A business
should be (in this writer's opinion) designed as a &machine& - i.e. with inputs,
outputs and what needs to be done in between. A well designed and maintained machine will
run on its own - without constant tinkering and fixing. Look at Macdonalds restaurants.
That's a machine if I ever saw one. Every detail is defined and operationalised. Very
little guesswork is necessary. Each location serves essentially the same standard of
quality and service. Will your machine work without you? Is it in good enough shape that
you can sell it for maximum profit? Some of the most successful ventures have been built
with this kind of rigor and planning in place.
Don't worry. You'll learn as you go. Good businesses have been built by good people
(note the plural). You might be able to say &I did it my way&, but it might be
better if &we do it our way&. No one has a monopoly on knowledge and experience.
Mentorship is strongly advocated. You can have two types of mentors - hands on people as
well as role models. Study the habits of those that have been successful. What can you learn
from them?
Mike Volker is the Director of the University/Industry
Liaison Office at Simon Fraser University, Past-Chairman of the Vancouver Enterprise
Forum, President of
and a technology entrepreneur.&
Michael C. Volker
Comments, suggestions and corrections will be appreciated!}