Business Set-up

We are approached frequently by budding entrepreneurs seeking to set up a business.  Almost invariably, the issue of costs arises, equally frequently with limited funds.

A substantial number of introductions involve “partners” joining forces to start a business.

What to do?

First, the usual default structure is to incorporate:  Tax advantages; liability avoidance; limitations on economic exposure; ease of structural arrangements among participants.

But:  (i) costs upfront.  First, about $1,800 to incorporate in Ontario.  Then a unanimous shareholders agreement – possibly $3,500 – $8,000 to complete.  Obviously, a heavy front-end expense.

But:  (ii) given the downside of personal exposure, these set-up costs ought to be viewed as insurance.

Further, if the business is, among others, a food consumable, a product delivery with representations, medical services, financial investments and a raft of other types of businesses where litigious exposure exists, there should be no doubt that your personal assets need to be protected.  If the business is importation of cotton, distribution of electronics, or much similar lesser personal exposure types of businesses, nevertheless, why forego the advantageous tax treatment?

As a wise adage offers:  Never do a deal for tax advantages only.

Similarly, I suggest, never begin a business without proper set-up.

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