5 Legal Tips in Starting Your Own Small Business
by Geoffrey Lim
Your entrepreneurial spirit may one day lead you to start your own small business. There are many non-legal issues to think about when starting your new business venture, but there are just as many legal issues that should occupy your keen business mind. Failure to do so could leave you and your new business unprotected. Here are some legal tips to help you ensure that your business starts on the right foot.
Pick a Business Structure
Choosing to operate your small business as a sole proprietorship, corporation, or a limited partnership will be a key consideration moving forward. There are tax and liability consequences with each business structure you choose. Consulting with an accountant and lawyer will help you determine which structure is best suited for you and your business.
Business Licenses, Permits, and Insurance
Make sure your business is legally allowed to operate. Depending on your type of business you may need certain municipal, provincial, or federal licenses and permits to operate. You should also consider obtaining business liability insurance to protect you in the event that your business is found responsible for injuries or property damage.
Speak to your accountant as to whether you should register for GST. A business with sales exceeding $30,000 over a 12-month period is generally required to register for GST. Registration before your business reaches the $30,000 threshold is often beneficial since it helps prevent the loss of recoverable GST. Failure to register when your business is required to do so could cause the CRA to register your business and demand retroactive payments for all the GST your business was supposed to have collected.
Have Your Contracts Ready
Small businesses will typically utilize contracts with their suppliers, clients, independent contractors, and employees. It is important to have contracts in place to outline in writing the terms and conditions of your business relationships. Having a written contract setting out the rights and responsibilities of each party to the agreement will reduce the likelihood of disputes in the future.
Seek Legal Advice Early
Retaining a lawyer in the early stages of your business and having your legal work done properly is often recommended and is usually more cost-effective than hiring a lawyer to fix problems arising from legal work performed without the assistance of a lawyer. Speaking to a lawyer at the early stages of your business can help you identify potential legal issues which may have been overlooked.