A practical list for new entrepreneurs

 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 employmentset 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

  • Recommended to discuss with accountant and/or lawyer whether to incorporate
    provincially or federally
  • To provincially incorporate, go to Canada Business Network and pick your
    province
  • To federally incorporate, see Science,Innovation & Economic Development
    Canada
  • Don’t be put off by seeming complexityit may be worth the effort

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 cashbased 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 multiyear 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

  • Legalmake 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 signoff from accountant (CPA) on bookkeeping system/software to be used that will pass federal and provincial tax filing/employee deduction requirements

NonProfessional Services (examples)

  • Garbage collection
  • Snow removal
  • Other
  • ! Beware the reputation of those with whom you sign contracts. Look for multiyear contracts, automatic rollover 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 emails 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 multiyear contracts, rollover 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 paperbased 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 dont have time, appoint/hire/outsource to someone who doesit could make the difference in your businesssuccess

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

Job Description

  • This should be in writing to lessen misunderstanding over job expectations

Interview

  • There are questions you may ask and those you may not

Employment Contract

  • Should be in writing and signed (reviewed by a lawyer for completeness)

Payroll System

  • for paying employee, remitting El, Workers Comp, CPP etc.

After Hiring

  • Know how El 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 El
  • 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.

Post Date: May 8, 2017

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