Legal issues for small business 

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You may think that you can't afford to hire a lawyer; however, legal counsel could be invaluable to your business.

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 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.

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 requirements

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.

  • Choosing and setting up a location

    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

    To ensure your business needs are met, be aware of a wide range of considerations when negotiating a commercial lease.

Contracts

You should get the advice of a lawyer when you are drawing up legal contracts such as:

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

This is not a comprehensive list. At the minimum, you should 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.

  • Accessing equity financing

    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 situations where you need to seek the advice of a lawyer in order to determine the best course of action. These include:

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

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 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.

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 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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