For newcomers looking to build a business in Canada, understanding the legal side of entrepreneurship can help set you up for success. This article serves as a starter guide, with advice from Pavel Malysheuski, business lawyer at Lockyer + Hein LLP.
“Canada is a great country to come and develop yourself professionally and personally, and develop your business,” he says. “This country is built by immigrants. We’re growing our business like a tree, and the end game is for this tree to bear good fruits, and for us to harvest those fruits.”
From taxation to business insurance and dispute resolution, here are some key considerations for newcomers looking to build and grow a business in Canada.
Taxation and liabilities
Your taxation will vary depending on how your business is structured. If, for example, you work for yourself, even if it is an activity as simple as cutting grass in the summer and shovelling snow in the winter, you may have very little in maintenance costs and only need to register yourself as a business. In this case, you are paying personal income tax.
Things become more complex when your business is expanding or when you have business partners. In this case, you will need to pay corporate taxes. To avoid confusion, consult with both an accountant and a lawyer.
Many accountants will advise you to register your business as a corporation once you’ve successfully established operations.
“Your corporation is your invisible friend, for two reasons. The main reason is that, as an owner of a corporation – even if it is a one-person corporation – if I incur any sort of liability doing my business, then it’s not my liability; that’s my corporation’s liability,” says Malysheuski. “Even if there is no one else other than me, I’m the shareholder, I mean, the owner of this corporation, I am the only employee of this corporation, and I’m cutting grass for my neighbours and somehow, I damage the lawn, it’s not my liability, it’s not I who is out of pocket to pay for this damage, that’s my corporation’s liability.
“And on the tax planning side, accountants will tell you typically that there is a great possibility, great opportunity to save on tax money and to optimize your tax profile,” he says. “However, you will pay more for corporate accounting, and there will be some maintenance costs.”
Also read: How to finance your business in Canada as a newcomer
Support structures
For your business to thrive, you cannot go it alone. Important aspects of running your business in Canada as a newcomer include surrounding yourself with a solid team of advisors, including accountants, lawyers, insurance providers and business development managers. It’s also important to hire a business immigration consultant before you come to Canada.
“In this country, there is a very strong network of business development support,” says Malysheuski. “Say in my region, it’s the BACD: Business Advisory Council of Durham, and every other region will have these business incubators. They typically have great resources. There are business incubators, and there are small business support agencies.
“In every province, in every municipality, there will be a government-supported agency, typically jointly funded by the federal, provincial or territorial government, and the local municipality,” he adds. “If you don’t know where to start, I would suggest going to this business development agency. They have great resources and are very helpful, very friendly, and their job is to help you succeed.”
Exit strategies
There are multiple reasons why you might want to sell your business. You might want to focus on a new passion, sell any excess assets, or hand over the reins to someone else as part of your retirement plan.
Either way, you might want to think about your possible exit scenarios, such as a third-party sale, a market-unique product, strategic investors, a strategic takeover or an IPO. You might have had this business for 30 years and are now planning your retirement, while keeping the business within the family or passing it on to the younger generation. Either way, speak to your accountant and your lawyer.
Malysheuski adds: “When you’re starting a business, you’re doing so, as I said, with the aim to grow your tree. It’s like your business is a living tree. At some point, it’s coming to fruition. Say it is a startup – a high-tech company you own, and now you want to sell it. There can be a situation of a buyout among business partners or shareholders.”
Also read: Are you a newcomer in Toronto and looking to start your business?
Business insurance
Insurance is probably the most important aspect of running any business in Canada. Depending on the sort of business you run, you might need to apply for insurance against general commercial liability, third-party liability, property insurance or industry-specific insurance.
As Malysheuski puts it, “Insurance is extremely important for business: you need to protect yourself.”
Potential disputes and dispute resolution
Another important aspect of running your business in Canada as a newcomer is dispute resolution. Think in advance about how you’re going to address potential disputes through your partnership agreement, shareholders’ agreement or any other instrument regulating the relationship between business partners. The earlier you think about it, the better.
“They say that if you want peace, be prepared for a war. Obviously, we’re not preparing for any war, but we definitely need to think in advance about potential disputes and potential dispute resolution mechanisms,” says Malysheuski. “And the earlier we think about it, the better for our business.”
With the right advice and support, you can build a strong foundation for your business in Canada.
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