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Legal issues for small business

Now that you are almost ready to launch your business, you may think that you don't need the additional cost of hiring a lawyer. That may be a big mistake. Read this document to understand why consulting a lawyer is essential for any small business start-up.

Lawyers are trained to interpret the law and those who specialize in business law can be worth their weight in gold. It is less expensive to retain a lawyer up front and have your legal work done properly than trying to hire a lawyer later on to fix problems that may have arisen from lack of legal knowledge. Sometimes procedures and forms for businesses look simple, but legal transactions are often more complex than they seem.

When do you need a lawyer?

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

Business structure

One of the first things you will need to do is to decide on the business structure that best suits your needs. Your options can range from sole proprietorships, partnerships, limited or incorporated companies to co-operatives. A lawyer can help you choose the correct form of business structure, based on factors such as the number of people involved, the type of business, tax issues, liability concerns and financial requirements of the firm. Your lawyer can also help you draw up the necessary legal documents that set out the terms of any partnership or other shared ownership, ensure that all parties will be treated fairly and that there is a mechanism for handling any disputes or disagreements.

• Forms of business organization
  
  http://www.canadabusiness.ca/eng/125/141/
  Find out which type of business structure is right for your business.

Buying an existing business

If you wish 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).

• Buying a business
  
  http://www.canadabusiness.ca/eng/125/140/
  What you need to know before purchasing an existing business.

Leasing requirements

Most small businesses will start by taking out a lease for their business premises. However, leases can be one of your largest expenses. Make sure that your lease will be suitable to your business needs, in case you wish to break your lease or expand your business. A lawyer can give you advice on any pitfalls or costs that may be incurred, before you sign on the dotted line.

• Choosing and setting up a location
  
  http://www.canadabusiness.ca/eng/125/143/
  Trying to decide where to locate your business and how to arrange it once you get there? Review the following resources and consider your options.
• Signing a commercial lease
  
  http://www.canadabusiness.ca/eng/guide/7424/
  To ensure your business needs are met, be aware of a wide range of considerations when negotiating a commercial lease.

Contracts

When you are drawing up legal contracts, you should get the advice of a lawyer. Some examples of contracts that you should get a lawyer's help with include:

• Licensing agreements
• Franchise agreements
• Employment contracts
• Subcontractor agreements
• Partnership, incorporation or shareholder agreements
• Lease agreements
• Mortgage, purchase agreements

This is not a comprehensive list. Above all, make sure you contact a lawyer before you sign any contract.

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.

• Steps to Growth Capital
  
  http://www.canadabusiness.ca/eng/guide/801/
  Learn how to develop the plan, the materials and the confidence to go after the equity financing for your business opportunity.

Other issues requiring legal advice

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

• Environmental complaints or concerns
• Employee problems or conflicts
• Disagreements between business partners
• Closing your business
• Protection of intellectual property

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

How should you choose a lawyer?

If you have used a lawyer before for a real estate transaction or other personal issue, he/she may be able to refer you to a lawyer who specializes in small business start-ups or to a business lawyer. Ask your business associates, friends and family for references of law firms they have used and received satisfactory services from in the past.

Make sure you have a comfort level with your lawyer, as you will be working closely for the life cycle of your business. Don't hire the first lawyer you speak to. You will have to do some searching for the best expertise you need for your business. Make a list of potential lawyers you wish to meet. Many lawyers will meet you free of charge for the first time to establish expectations on both sides, as long as you don't try to get free legal advice while you are there.

You will probably want to have a general business lawyer to handle your day-to-day affairs, but look for someone connected to specialists in specific areas of law who can refer you, as necessary, to someone with more expertise in areas like intellectual property, equity financing, and so on.

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 will have to make arrangements ahead of time with your lawyer, so you are both on the same page.

Where can you find a lawyer in Canada?

Below is information on how to search for a lawyer in Canada and links to law societies and bar association affiliates.

• Accredited Professionals
  
  http://www.ic.gc.ca/eic/site/ccc_bt-rec_ec.nsf/eng/h_00006.html
  Do you need professional help for your business? Access this national, online database of accountants, legal professionals, valuators and auditors.
• Federation of Law Societies of Canada - Links
  
  http://www.flsc.ca/en/canadas-law-societies/
  Are you looking for a listing of legal resources in your area? Check this listing of law societies and affiliates across Canada.