Legal issues for small business

Lawyers who specialize in business law can help you navigate complex transactions related to starting or expanding your business. They can also help you make informed business decisions and save you time and money in the long run, by having things done properly from the outset.

When do you need a lawyer?

There are a number of situations where you should strongly consider consulting a lawyer.

Choosing a business structure

One of the first things you will need to do is decide on the business structure that best suits your needs. A lawyer can help you choose the correct form of business (sole proprietorship, partnership, corporation, co-operative) based on the number of people involved, the type of business, tax issues or liability concerns, and financial requirements.

Your lawyer can also help you draw up the necessary legal documents that set out the terms of any partnership or other shared ownership. This will help ensure that all parties will be treated fairly, and that there is a mechanism for handling any disputes or disagreements.

Buying an existing business

If you want to buy an existing business, you may have to decide whether to buy only the assets of the business or, in the case of an incorporated company, the shares of that company. With any business purchase, you should have a buy-and-sell agreement, signed by both parties, that spells out the demands and obligations of each, as well as the terms of the agreement (for example, non-competition provision).

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Leasing commercial space

There are a number of things to consider before signing a commercial lease. Because a lease can be one of your largest expenses, you'll want to make sure that it covers relevant terms, and that it is suitable to your business needs. For example, you'll want to know what is required of you if you ever wish to break your lease or expand your business. A lawyer can give you advice on potential pitfalls or costs that may be incurred, before you sign on the dotted line.

Drawing up contracts and agreements

You may want to get the advice of a lawyer when you are drawing up legal contracts and agreements in areas such as:

  • Licensing
  • Franchising
  • Employment
  • Subcontracting
  • Partnership, incorporation or public offerings
  • Leasing
  • Purchasing or obtaining a mortgage

This is not a comprehensive list. At a minimum, it is advisable to contact a lawyer before you sign any contract.

Seeking equity financing

If you plan to seek equity financing for your business, it is important to contact a lawyer to help you draw up the terms of the shareholder agreement and/or to review the legal documents provided by a potential investor. Your lawyer can also help you assess the impact of any new shareholder agreement on other obligations and existing contracts with employees, suppliers or financial institutions.

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Other issues requiring legal advice

There may be other situations where you need to seek the advice of a lawyer in order to determine the best course of action. These include:

  • Environmental complaints or concerns
  • Employment issues such as contracts, agreements, and legal proceedings
  • Disagreements between business partners
  • Business closure
  • Protection of intellectual property
  • Closing your business / dissolving a corporation

Any time you are unsure about the legality of something, or if the legality of your business practices is questioned, you should be sure to get the advice of a lawyer.

How should you choose a lawyer?

If you have a lawyer for non-business matters, he or she may be able to refer you to a business lawyer who specializes in the type of legal assistance you're looking for. Ask your business associates, friends and family for references as well.

Take the time to search for the expertise needed for your business. Make a list of potential lawyers you wish to meet. Some lawyers may offer a free, first-time consultation to establish expectations on both sides and evaluate a potential working relationship.

Make sure you understand your lawyer's billing practices. If you think it may be a little while before revenue comes in to your business, you may have to make appropriate arrangements to pay your legal fees.

Where can you find a lawyer in Canada?

Search for lawyers, law societies and bar association affiliates in Canada.

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