Types of Businesses and How A Lawyer Might Help
There are many types of businesses. This article touches on some of the key types of businesses and explains what a might be the typical role of a lawyer in providing advice or assistance to you in setting up your business or in having others join you in your business.
What does a lawyer do, how does a lawyer help with setting up a business?
A lawyer helps you to decide what type of business organization is best for you, sometimes with the help of your accountant.
Types of Businesses:
There are many types of businesses. The main types are described below.
Sole Proprietorship – one owner, one decision maker, one person who is entitled to the profits, responsible for the risks and exposed to liability.
Partnership – two or more owners, shared decision making, shared earnings which can be shared in any proportion and based on any triggering events agreed upon by the partners.
Joint Venture – a type of partnership usually limited in scope to a particular project or specific goal.
Corporation – can have one or more owners, owners are shareholders, directors run or manage the business – often owners and directors are the same person or people – benefits from limited liability. Limited liability means that without more, personal assets are protected.
Sometimes the type of business structure is chosen for you depending on the people you are working with and the type of work you are doing.
How does a lawyer help with each of these?
Sole Proprietorship – People tend not to get help from lawyers to form a sole proprietorship, but, might seek help when entering into agreements with suppliers or service providers either to prepare or draft the agreement or when obtaining loans.
Partnership – People often seek help with getting a partnership agreement put into place to set out their agreement. It can be very helpful to have a lawyer assist with things like what the parties ideas are about the types of contributions each partner is to make in terms of money, time, and other assets, entitlement to get involved in other businesses, what happens if someone gets sick temporarily, permanently or dies or if someone wants to move out of town, out of the country, as well as to address responsibility for obtaining insurance.
Joint Venture – can be made up of a variety of partnerships, corporations, sole proprietors – a lawyer might help the participants determine how to terminate the joint venture if it goes well or if it goes badly and who is entitled to the gains which might be information, money, or a property for example.
Corporation – A lawyer helps to work with a client or clients to choose the corporate name by analyzing a name search; recommends a corporate structure in terms of number of directors and types and classes of shares to allow various types of control and participation in ownership of the corporation depending on the needs, goals and plans of the incorporator. For example, a corporation can allow for what is considered to be an acceptable form of income splitting between the spouse and children of an incorporator, can be used for estate planning, and can allow several people to invest money in a common purpose.
Usually, the lawyer drafts the articles of incorporation, by-laws and initial resolutions based on the instructions of the client and files them on behalf of the client with Industry Canada or with Service Canada depending on whether the Corporation is a federal corporation or a provincial one.
Unless a corporation is a numbered company, a Nuans name search gets filed. A lawyer assists with advising on the choice of names and will generally recommend against the use of a similar name because of the risks which include the refusal of the right to use the name at all, a potential application to delete the name from the registry, a passing off action and/or a trade-mark infringement action, all of which can impose significant cost to the client/business.
If more than one person is a shareholder, lawyers typically recommend a shareholders agreement to deal with what to do, at a minimum, when someone becomes disabled or dies, and the rules for selling or transferring shares.
The article posted here is for general information. We hope you find it useful. For advice specific to your circumstances you should consult a lawyer. We would be pleased to speak with you if you have questions about our services or need the assistance of a lawyer.