Legal issues for small business

Lawyers are trained to interpret the law, and those who specialize in business law can be invaluable to your business. It is less expensive to retain a lawyer up front and have your legal work done properly than to hire a lawyer later on to fix problems that may have arisen from that lack of legal knowledge. Sometimes things can appear to be straightforward, 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.

Choosing a 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 range from sole proprietorships, to partnerships, to limited or incorporated companies, to co-operatives. A lawyer can help you choose the correct form of business structure, based on the number of people involved, the type of business, any tax issues or liability concerns and the 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 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).

Leasing commercial space

You may be inclined to begin by taking out a lease for your 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.

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:

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.

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:

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

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 will have to make arrangements with your lawyer ahead of time.

Where can you find a lawyer in Canada?

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

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