Halifax Business & Corporate Lawyers
Starting a business can be exciting. However, you need to choose its legal structure before you can register it. The key is to know what structure you should put in place and what the business advantages and disadvantages are among the different options available to you. Our business lawyers in Halifax can explain the different legal structures and which one best suits your needs.
Operating with the right type of legal entity is critical for your business. No matter if you’re starting a new business or want to ensure that your existing company is legally sound, the Halifax corporate lawyers at Kimball Law can provide effective representation. Our legal team will work very closely with you to make this process as efficient and simple for you as possible. Contact us today to book an appointment.
What Can a Halifax Business Lawyer Do for Your Business?
Some people start out as a sole proprietorship in Nova Scotia (or partnership) before incorporating when the business is relatively new, and the income generated from the business does not attract a lot of tax. As your business expands, it is more important to consult with a business or corporate lawyer near you, and your accountant, to determine if it is time to incorporate your business.
Here at Kimball Law, our Halifax business lawyers can help you determine if the time is right for you to take your sole proprietorship to the next level and incorporate, as well as advise you on the advantages and disadvantages of incorporating a Nova Scotia company.
Additionally, a business lawyer can also help you identify who you want the shareholders to be and what advantages and disadvantages may exist in the choice of your shareholders.
A crucial piece of your business plan may include your succession plan. A succession plan can be important to create simultaneously with your company or corporation so that your retirement and succession plan is in place to ensure an easy transition of the business to the next generation.
In determining which legal structure is right for you, consideration should be given to different criteria such as:
- who will own the business;
- tax advantages and disadvantages;
- personal liability.
Below are some of the most common structures that Nova Scotians use to start their business:
Sole Proprietorship in Nova Scotia
A sole proprietorship is a business owned by one person and is not incorporated.
A partnership is made up of two or more partners. It is not incorporated. Under this structure, a partner can be a real person or corporation. Partners can share in the business equally or have an unequal interest in the partnership. For instance, while a Nova Scotia sole proprietorship is owned by one person who receives the benefit of all the business income, partners would divide that business income either equally or unequally.
If this is the type of business structure you are pursuing, you may want to ask your business lawyer to help create a partnership agreement, which sets out the rules for the partners. For example, this agreement can spell out what percentage of the business revenue the partners share. It can also set out what happens to the business interest of a recently deceased partner. This may avoid the potential for the newly deceased partner’s spouse (under his/her Will) to become your new partner, which can happen in the event that you have a partnership but no partnership agreement.
Another benefit to having a corporate lawyer draft your partnership agreement is to ensure a provision for key person insurance. This is insurance that pays out business debt that you and your partner incurred over the course of your partnership and is left to you if your partner dies while you are still in active business with one another. Our Halifax business lawyers can explain the advantages of key person insurance and whether it makes sense for you.
In Nova Scotia, a corporation, also referred to as a company, is a separate legal entity. It has all the rights, powers and privileges of a person and the “owners” become shareholders. The owner of a corporation or company can be a sole shareholder, or there may be other “owners” in the business that are shareholders. Shareholders can be either equal or unequal owners of the shares in the company.
Who Will Own the Company?
The owners of a company, more commonly known as shareholders, are to be determined from the outset. For example, a sole proprietor who has a successful business may end up earning significant revenue that results in their accountant suggesting that they incorporate.
If the sole proprietor continues in the business alone, then it may make sense to become the sole shareholder. If that individual is the one responsible for running the business but wishes to split his income with other family member(s), then he/she may want to have other shares issued to family members.
It will be important to speak to your accountant and a business lawyer near you to get advice before doing this.
Advantages of incorporating your business in Nova Scotia
There are many benefits and protections that you can enjoy when starting a corporation. Below are some of these advantages.
In Nova Scotia, there are some tax advantages that are only available to corporations. For instance, corporations are taxed less than individuals. You may also be able to deduct the medical insurance for your family through your corporation. Additionally, losses are fully deductible for a corporation whereas a person must establish profit before deducting losses.
One of the main reasons for incorporating your business is to limit your liability or the liability you and your partners share. A sole proprietorship or partnership in Nova Scotia means the owners are personally liable for the debts and liabilities of the business. This means that your creditors can go after the assets in your name such as bank accounts, investments and in some cases, even your house. By engaging the services of a Halifax business lawyer, you can evaluate the right type of business structure to be protected from these kinds of liabilities.
If you are a Nova Scotia sole proprietor or a partner in a partnership, on death the assets of the business might go to your heirs or might not exist anymore. With a partnership, the death of one partner may result in the dissolution of the business. With a corporation, on the other hand, you can leave your heirs the shares in your company, perhaps in different percentages. For example, you may want most of the shares left to the most capable of your heirs for the purposes of running the company.
While partners can have partnership agreements (see “Partnerships” above) shareholders of a company can have a shareholder’s agreement. A shareholder’s agreement can determine what happens to the shares of the deceased shareholder at death to ensure that shares go to one or more of the surviving shareholders.
Again, key person insurance could be purchased (and expensed) by the company to pay the premiums each year. Upon death of one of the shareholders (usually the most valuable business owners in the company) insurance will be paid to the surviving shareholders. This provides funds for the surviving shareholder(s) to then purchase the shares of the deceased shareholder.
Shareholder agreements and partnership agreements are very important and require a commercial lawyer to assist you. A lawyer will know what questions to ask in order to identify the different areas you will need covered in your agreement. While you may think you know of several areas and items you want included in the agreement, often a Halifax business lawyer will be able to identify other issues you may have not thought of that will be important for you and your company.
Speak to Our Halifax Business Lawyers
Kimball Law offers a range of services to businesses in Halifax and the Annapolis Valley. Whether you already own a company or are a new business owner, our team can assist you with determining the best structure for your needs. Call 1 (902) 422-8811 today to contact our Halifax business lawyers.