Basic Nuts and Bolts of Building a Business - Entrepreneurship 101

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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.

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Basic Nuts and Bolts of Building a Business - Entrepreneurship 101

  1. 1. Pg 1!
  2. 2. Entrepreneurship 101!Presented by: Tony Redpath - Vice President Partner!!Programs, MaRS Discovery District!October 19, 2011!
  3. 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. 4. Your Ecosystem..Just at the beginning….. You Your Inc. Customers
  5. 5. Your Ecosystem..Just at the beginning….. You Your Your Inc. Customers Suppliers
  6. 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. 7. Incorporation in Ontario¨ Provincial For Profit Incorporation –  Service Ontario website –  Business Corporations Act¨  Provincial for Non Profit Organizations –  CRA Website
  8. 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. 9. A"er  incorpora,on,  taxes  will  follow  ….¨ Regardless  of  incorpora4on  jurisdic4on,  taxes  are  a   requirement   –  Federal  Corporate  Tax   –  Provincial  Corporate  Tax   –  HST  
  10. 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. 11. Your EcosystemThe Expansion Continues Federal and Provincial Govt. Your You Your Suppliers Inc. Customers Accountant
  12. 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. 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. 14. Your Ecosystem Federal and Provincial Govt. WSIB Your You Your Suppliers Inc. Customers Lawyer Accountant
  15. 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. 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. 17. Your Ecosystem CRA Federal and SRED Provincial Govt. WSIB Your You Your Suppliers Inc. Customers Lawyer Accountant
  18. 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. 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. 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. 21. Tony Redpath – tredpath@marsdd.com!

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