basic nuts and bolts of building a business - entrepreneurship 101
DESCRIPTION
This lecture outlines the legal and tax considerations of starting a business, including how to register and structure your business. You are introduced to the importance of understanding the entire “ecosystem” of your business, including distribution partners, industry contacts, lawyers and human resource specialists.TRANSCRIPT
Pg 1!
Entrepreneurship 101!Presented by: Tony Redpath - Vice President Partner!!Programs, MaRS Discovery District!
October 19, 2011!
Creating an Ecosystem…
When you start an enterprise, you have to work within an exis4ng ecosystem while seeking to create your own rela4onship network and ecosystem… – Customers – Suppliers / Providers – Government – Regulatory bodies – Trade Associa4ons
Your Ecosystem.. Just at the beginning…..
You Inc.
Your Customers
Your Ecosystem.. Just at the beginning…..
You Inc.
Your
Suppliers
Your Customers
What should be my first step? Incorporation
¨ For Profit and Non Profit Organiza4ons: – For Profit Incorpora4on
• Federal incorpora4on – Canada Business website – Canada Business Corpora4ons Act
– Non Profit Organiza4ons • Canada Non for Profit Corpora4ons Act • Non for Profit Incorporators Handbook • Charitable Status
Incorporation in Ontario
¨ Provincial For Profit Incorporation – Service Ontario website – Business Corporations Act
¨ Provincial for Non Profit Organizations – CRA Website
Incorporation in the US Moving South of the Border?
¨ For Profit Options: – Delaware incorporation
• US Investor Base
¨ Non Profit Options – Guide Star – Filing Requirements – IRS – L3C Legal Structure
A"er incorpora,on, taxes will follow ….
¨ Regardless of incorpora4on jurisdic4on, taxes are a requirement – Federal Corporate Tax – Provincial Corporate Tax – HST
Rules of the Incorporation & Taxes Lesson number 1: Get Help!
¨ “The incorpora4on process can be very complex. You may wish to obtain legal and tax advice to assist you with the prepara4on of the incorpora4on documents and shareholders' agreements.” – Canada Business website
¨ Approximate cost to hire an accountant / lawyer to handle all the above paperwork is $800 -‐ $1500
¨ Remember – you are building a structure for success
Your Ecosystem The Expansion Continues
You Inc.
Your
Suppliers
Your Customers
Federal and Provincial Govt.
Accountant
Post Incorporation.. Founders, partners & employees
¨ You will need a shareholders agreement – it can be 1 page or 100 pages, but it must cover, at a minimum: – What is the ownership split (at the start; sweat equity vs salary) – How are decisions made – What are each person’s responsibili4es – Assignment of Intellectual Property (esp. employees) – There are many other issues that can be covered in a shareholders
agreement (see Term Sheet lecture) • Legal advice is highly recommended
¨ Remember -‐ you are building for success
Are you going to have employees?
¨ You will need an employee agreement that covers not only the job description and salary, vacation etc. but also IP ownership, confidentiality, non-compete, non-solicit clauses.
¨ More taxes – you need to remit payroll deductions for income tax, Employment Insurance, Canada Pension Plan (the good news is that when you get the other federal tax numbers, you will also be set up for payroll taxes)
¨ You need to register with the Workplace Safety and Insurance Board (WSIB)
Your Ecosystem
You Inc.
Your
Suppliers
Your Customers
Federal and Provincial Govt.
Lawyer Accountant
WSIB
Where should I register my enterprise name?
¨ How do I register my enterprise name? – Canada Business website
¨ How do I seek informa4on about trademarks & patents? – Canadian Intellectual Property Office website
Types of Organizations Research and Development
¨ Scien4fic Research and Experimental Development tax credits (SREDs) – A major advantage for Canadian companies – To qualify for the SR&ED program, work must advance the
understanding of scien4fic rela4ons or technologies, address scien4fic or technological uncertainty, and incorporate a systema4c inves4ga4on by qualified personnel.
– Claimants can apply for SR&ED investment tax credits for expenditures such as wages, materials, machinery, equipment, some overhead, and SR&ED contracts.
– Generally, a Canadian-‐controlled private corpora4on (CCPC) can earn an investment tax credit (ITC) of 35% up to the first $2 million of qualified expenditures for SR&ED carried out in Canada
– Scien4fic Audit and Financial Audit
Your Ecosystem
You Inc.
Your
Suppliers
Your Customers
Federal and Provincial Govt.
Lawyer Accountant
WSIB CRA
SRED
Beginning to build your network Establish a commercial network that compliments your exis4ng networks
¨ Building Effec4ve Rela4onships 101 – Professional Organiza4ons & Trade Associa4ons – Be Strategic
• Too many to count…. • Why do I need to be there? Who do I need to meet?
– Scien4fic Conferences – Trade Shows
¨ Partners – Government Officials – Your Bank
Your Ecosystem
You Inc.
Your
Suppliers
Your Customers
Federal and Provincial Govt.
Lawyer Accountant
WSIB
Bank Trade associations Trade Shows Conferences
Regional Networks Regulatory Bodies
CRA SRED
Consider things NOT to do….
¨ Don’t run out and commit to a big office with lots of fancy furniture – get the space that you need, shop at IKEA and grow your space as necessary
¨ Don’t hire your relatives simply because they are available – get the team that you actually need
¨ Don’t hire your lab, old college university friends mates UNLESS they can offer you something to build your organization
¨ Don’t assume that the “understanding” that you have with a colleague / employee is indeed an understanding
¨ Remember – attitudes change when there is money on the table
Tony Redpath – [email protected]!