Megan Cornell, a business lawyer here in Ottawa with Momentum Business Law joins me on the podcast this week to talk about what you need to do to legally run a business. The topic of business and law is a robust one, so Megan answered three of the most common questions she hears from business owners. While Megan operates her firm in Ontario, what she shares is generally applicable across Canada.
Do I need to incorporate my business?
If you are operating a business or are just starting a business and are thinking of incorporating, the first step is to talk to your accountant. Incorporating means your taxes will be separate from your own, personal taxes. If your personal tax situation is one in which it makes more sense for you to be a sole proprietor then it makes more sense for you to not incorporate rather than have an entirely separate sets of tax returns and financial statements, which would mean more fees.
If your accountant thinks incorporating is a good idea then you will want to talk to a business lawyer about what needs to be done to incorporate.
If you are in a business where you think there needs to be some distance between you and your client base in terms of liability, then you may want to look into incorporating. For example, a restaurant owner should probably incorporate because there is a lot of liability risk associated with owning a restaurant. The same would go for a white water rafting business, where you have an elevated risk of being sued.
The warning Megan always gives regarding incorporating, is this: as a small business you are usually responsible for any debts of the incorporation, so if you are entering into a lease for a store front, for example, the landlord or bank will probably ask you to personally guarantee the lease. You will not be able to protect yourself financially from these risks through incorporating (many people think incorporating will do this).
There is a lot of homework to be done before you decide to incorporate, and before deciding you should know what you will be able to protect yourself against from that incorporation and what you will not be able to protect yourself from.
Do I need to register my business within a certain jurisdiction (i.e., Ontario) to carry on business there?
If you have a store front or sales people within a certain jurisdiction or if carry on a great deal of your business within a certain province then you probably need to register your business in that specific province. In some provinces this is easy to do whereas in others it is not. In Ontario it is easy and it is free (yay!). The province wants (and needs) to know about your business because they want to collect provincial taxes from you.
If you are an online business you do not need to register in every province. If you are thinking that because you have one person in Nova Scotia who you do business with that you have to register there, you are probably wrong. If you aren’t sure, ask your business lawyer. They will look at many factors, including physical presence within that province, the amount of business being done there, etc.
You can register your business at a provincial and a federal level.
Do I need to register my business name?
The Business Names Act is an act within Ontario, and likewise in other provinces, that was created so the public knows who they are interacting with. If a business, incorporated or not, has a name for their business that is held out to the public, then you are required to register that name. To not do so is an offense.
It costs $60 to register your business name and it is good for five years. You can have ten business names registered to any one person. There is almost no vetting of these business names. People can object to them i.e., if there is a business name similar to your own, but for the most part you can have many similar business names registered within a province.
Keep in mind that registering your name is not registering your business. One is about telling the public who they are dealing with and the other is about collecting taxes.
There are a lot of different pieces to lawfully run a business. If you have more questions, book a consultation appointment with Momentum today.
Resources & Links
NUANS Search (can be an easy way to check if your name, or a similar name, is registered)
Trademark Search (even if you don’t plan to trademark your name in the near future, it is a GOOD idea to check if someone else has already!)
Some helpful blog posts from Megan:
If you are thinking about incorporation – making the decision between a Provincial and a Federal incorporation:
How to protect your business name: