Legally protecting your business is not something entrepreneurs should skip over. Take it from Jamie Bell, a practicing lawyer in BC who has been advising small business owners on how to manage the legal aspects of their business. She’s not your ordinary lawyer as she’s also an entrepreneur with her own e-commerce company, Contracts Market.

Please note, this blog post and podcast offers general information. Jamie advises you to go see a local lawyer for specific advice.

1. All About Incorporating (03:48-19:20)

The first legal question many small business owners mull over is whether they should incorporate or not. Incorporation turns your company into a new legal person. They can do everything a person can such as enter into contracts, buy real estate, etc. It is the legal part of separating yourself from your company.

There are some instances when you should incorporate. If your business is in a risky category such as childcare, home renovations, then it’s a good idea to separate your business assets from your personal and business liability. (8:40) Another great reason to incorporate is if you are going into business with a partner. You need an
ownership structure set up as a company. (10:13)

On the flip side, there are valid reasons to not incorporate. (17:57 – 19:20) Some key reasons include it’s expensive and entrepreneurs often underestimate the administrative aspects. Business owners will need to spend money on legal fees to sort out issuing shares and getting the business structure correct. As well, there is a $350/year fee and the costs with speaking to a lawyer and accountant. With administrative procedures, entrepreneurs who incorporate need to determine how they will pay themselves, either through dividends or going on payroll.

2. What are some legal issues that can come up in business?

The best legal action entrepreneurs can take is to have solid contracts in place to manage your relationships with clients. This also applies to the people who visit your website with a Terms of Use and Privacy Policy. (22:38)

Contracts help you determine how and when you get paid, what services you are providing, what the client communication looks like, and what boundaries you can put in place. Overall, this will help you earn money. (23:18) Another great benefit from having solid contracts is that they help weed out clients that aren’t a good fit as you’ve set expectations early on.

3. How to Tell the Difference Between a Contractor and Employee:

It is fundamental that you know the difference between employee and contractor. Unfortunately, the lines are getting blurrier and blurrier as it’s a sliding scale. To help clarify this, we recommend that you read Jamie’s blog post on this topic, linked in the show notes below. (30:42)

In general, business owners need to be aware that if you terminate a contractor who is acting like an employee, there can be big consequences over severance pay and CPP and EI payments. When there’s a dispute over this with the employee thinking that the employer should have paid the taxes, the employer is often on the hook for this. The relationship is more of an employer relationship than a contractor one. (31:30)

Listen to episode 6 of this podcast (linked in show notes) on whether you should hire a contractor or employee.

4. Other Legal Issues:

Jamie has observed that there’s confusion over business names versus trademarks. Having a domain name does not mean you have a trademark. As well, having a registered business name is not the same as a trademark. Jamie recommends going beyond a Google and Instagram search and do a NUANS search instead. This will show you the legally registered and trademarked business names, saving you a massive headache and expense down the road. (34:45-36:58)

Show notes: