Incorporating your small business is a big step and if done correctly, it can result in great growth for your business. However, you need to be aware of some common mistakes that small business owners tend to make when incorporating their business.
1.Not naming your business
Many people are so concerned with the process of incorporating their business that they may forget to choose a name for their company. This does not stop the corporation from operating, but instead an incorporation number is used as its legal identifier. This number is used in place of a name for all business-related activities. It is therefore recommended to prepare a company name beforehand, as it will help the growth of your business from a branding perspective.
Many small business owners make the mistake of believing that government-provided incorporation forms are all you need. However, there are additional legal documents that are required. It is recommended that you consult a small business lawyer who will ensure that you have all of the required documents and aid in setting up the correct structure for your business.
3.Neglecting paperwork/Corporation records
Related to the issue of having the required documentation, is the issue of keeping all paperwork up to date. Failing to do so can result in fines and even pose risks to your business. This goes hand-in-hand with the mistake of not submitting corporation records. The law requires annual financial records to be submitted by corporations and if a corporation fails to do so for two years consecutively, it can be dissolved. The government also has the ability to remove the company name from their register. Ultimately, the company can be reincorporated, but it results in extra costs for everyone involved. It is, therefore, important to ensure you work with a small business lawyer and/or an accountant because they can help ensure that the paperwork is in order.
4.Not including a shareholder’s agreement
A shareholder’s agreement can prove to be very beneficial in the long run. It is up to the shareholders to decide on and put in place an agreement that outlines the process for resolving issues. Waiting until a dispute arises to create a shareholder’s agreement can cause losses for the business as it may make operating the business difficult. Again, it is important to keep this in mind and have a small business lawyer draft an agreement.
Incorporating is a big step and many business owners believe their small business is too small to incorporate. This presumption can ultimately slow down the growth of your business and prevent you from receiving the benefits associated with incorporating. Speaking with a small business lawyer can help you understand if incorporation is right for you.
If you have any questions or want to discuss incorporating your business, you can leave a comment below or book a consultation with me.