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
What does a lawyer do, how does a lawyer help with setting up a
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
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
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
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 - ie. 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 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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