Canada: Legal Aspects Of Starting A Business: Quick Tips!

Last Updated: April 15 2013
Article by Cam Cameron

Technology startups need to know how to raise capital, protect their inventions, access government technology support programs, develop commercialization strategies, and navigate federal and provincial legislation and regulations. To help answer some of those questions, Gowlings participated in a tweet chat with Startup Canada. Here is a summary of the key tips to consider:

What are the basic legal issues that all entrepreneurs should know about?

Starting with an entrepreneur's bright idea, or a product from an early-stage company, entrepreneurs need to protect their invention, learn how to commercialize their product and look for help with funding for growth.

Quick tips:

  • Privacy law. Collect, use and disclose personal information with care. Keys items: policies & consent. Visit the Office of the Privacy Commissioner of Canada website.
  • Consumer protection. Know your client's rights to avoid breaching them.
  • Speak to a lawyer for advice about tax structure, IP rights, shareholder agreements, employment agreements and incorporation.
  • File trademark applications to protect the name of the invention.
  • Meet with potential VC and angel investors to secure funding.
  • Look for government grants and support.Understand your risk and your risk threshold. Speak to an accountant.
  • Register your business name. Be sure you have right to use it. NUANS search isn't enough & doesn't cover Quebec.

Are there any free/low cost resources for CDN startups?

There are numerous federal and provincial resources for funding. Contact your local government agency.

Quick tips:

What are the most common legal pitfalls that befall Canadian entrepreneurs?

Entrepreneurs need to protect their inventions and contact experts to get advice on the following:

Quick tips:

  • Lack of ability to capture the lost dollar. Funding agreements are weak or insufficient.
  • Leases. Typically largest cost to small businesses and not easy to escape.
  • Beware of employee costs; it adds up fast.
  • Material outsourcing services failed and no formal contract is in place to assist recovery of losses
  • Lack of financial resources to protect IP
  • Poor corporate governance. Who does what, when and how?
  • Have exit strategies before you need it. Businesses fall apart because of failing to plan for internal corporate disruption.
  • Risk = landmines. Without experience & advice, green entrepreneurs may walk into 1 – you can't consider what you don't know.

How useful are templated legal documents for early stage businesses?

Template documents can be helpful but dangerous (particularly if you don't understand the effect of particular language or why a clause is included in the agreement). It is important to understand the purpose (and for whose benefit a particular clause was drafted). It's equally important to know what may not be included in a template agreement. The best advice is to get all important agreements reviewed by counsel.

Quick tips:

  • Template website T&C, sponsorship, nondisclosure, employment/consultant agreements, letters of intent etc. can be helpful.
  • Templates should be drafted in consideration of the jurisdiction they are to be used in.
  • Don't set yourself up for failure - set reasonable goals. Beware of entrepreneur fatigue.

How can CDN entrepreneurs best protect their IP?

The best first step is to be informed about what can be protected and how. Many start-up companies make IP mistakes early on (such as failing to consider patenting before disclosing their inventions or failing to determine the availability of their name before going to market). Such mistakes can be difficult and costly to remedy. Proper IP protection should be considered an investment, not a cost, for early stage companies.

Quick tips:

  • Investigate patent protection before disclosing your invention
  • Understand disclosure rules and the use of NDA's prior to filing for patent protection
  • Reduce costs by doing some preliminary #IP searches before you spend your limited resources. Google it!
  • Make sure your licenses, sales contracts, technology transfer agreements and employment contracts all protect your IP rights
  • Visit the Canadian Intellectual Property Office website

How do Canadian IP laws stack up with those south of the border?

U.S. and Canadian laws are quite similar, but there are important differences to be aware of. Your Canadian IP advisor can help you identify and work with U.S. IP counsel who can guide you through the process of protecting your IP in the US.

Looking for more information on how Canadian IP laws stack up with those south of the border? Read our comprehensive guide.

Quick tips:

  • Talk to your IP lawyer!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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