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.

1. Pg 1!

2. Entrepreneurship 101!
Presented by: Tony Redpath - Vice President Partner!
!
Programs, MaRS Discovery District!
October 19, 2011!

3. 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

4. Your Ecosystem..
Just at the beginning…..
You Your
Inc. Customers

5. Your Ecosystem..
Just at the beginning…..
You Your
Your
Inc. Customers
Suppliers

6. 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

7. Incorporation in Ontario
¨ Provincial For Profit
Incorporation
– Service Ontario website
– Business Corporations Act
¨ Provincial for Non Profit
Organizations
– CRA Website

8. 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

9. A"er
incorpora,on,
taxes
will
follow
….
¨ Regardless
of
incorpora4on
jurisdic4on,
taxes
are
a
requirement
– Federal
Corporate
Tax
– Provincial
Corporate
Tax
– HST

10. 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

11. Your Ecosystem
The Expansion Continues
Federal and
Provincial Govt.
Your You Your
Suppliers Inc. Customers
Accountant

12. 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

13. 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)

14. Your Ecosystem
Federal and
Provincial Govt. WSIB
Your You Your
Suppliers Inc. Customers
Lawyer Accountant

15. 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

16. 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

17. Your Ecosystem
CRA Federal and
SRED Provincial Govt. WSIB
Your You Your
Suppliers Inc. Customers
Lawyer Accountant

18. 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

19. Your Ecosystem
CRA Federal and
SRED WSIB
Provincial Govt.
Your You Your
Suppliers Inc. Customers
Bank Lawyer Accountant Trade associations
Trade Shows
Conferences
Regional Networks
Regulatory Bodies

20. 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

21. Tony Redpath – tredpath@marsdd.com!