Small Business Tips

In the spirit of Small Business Week coming up in October, here’s some tips and traps for small business owner/operators:

Protect your business name, not just your corporate name: If you have a corporation, the legal name of the corporation, with “Ltd.” or “Inc.” is your corporate name. However, businesses usually use a shortened form, without the “Ltd.” or the “Inc.” in their advertising, signage, invoices and correspondence, with or without a logo. This is the business or trade name. Legally, it is a separate name from the corporate name, and should be protected separately.

When I incorporate a new corporation, I always register the business name under the Business Names Registration Act (Ontario) for Ontario usage, and in other provinces or states if the corporation will be carrying on business there. Such registration is required – it isn’t optional.

A business name is often used with a logo and a special design: this is a trade-mark. In Canada, a trade-mark is created when something original is first developed, whether or not it is registered federally. I recommend trade-mark registration in Canada, and certainly, in the U.S., where registration is mandatory.

Manage your trade-mark: Use your trade-mark the same way – same font, same colours, same style and logo design, every time you use it in whatever form. If you decide to change it, then change it on everything. Inconsistent usage weakens your ability to protect your trade-mark.

Protect your own money in the business – secure all shareholder loans: This is absolutely legitimate (recently confirmed by the courts), and is easily done at a low cost. If your business goes south, the secured creditors, along with employees and the landlord, get first dibs on the assets. Then, if anything is left, the trade creditors and other unsecured creditors (including owner’s loans) share what is left. If your loans are secured, then you get what’s left after the bank, employees and the landlord, but before the unsecured creditors – this can be a huge difference.

The paperwork is simple: a promissory note for every advance or total amount, a general security agreement and a resolution of directors, followed by registration under the PPSA.

Like the registration of a business name, I make it part of my incorporation/start-up process to secure shareholder loans.

Retain good advisers, based on word of mouth: The rich get richer because, in part, they hire and keep informed their professional advisers: lawyer, accountant, insurance agent, financial adviser. It’s not too expensive – you can’t afford not to do so.

Put it in writing & keep a file: Confirm phone calls or meetings with follow-up emails or letters, based on notes made during the call or meeting. Diarize follow-up and deadlines. “The party with the best file wins” is a good axiom. This is especially true with employees. Many a time I’ve advised an employer that yes, indeed, they might have had “just cause” to turf a bad employee, except for one thing: the absence of written warnings, meeting notes, a paper trail. The devil is in the details.

Give key employees incentives, NOT shares: Corporations are not democracies, but give an employee some shares, and first thing you know, there’s a revolution happening. Shareholding is not a guarantee of a job for life either – but employees think it is. Use good old cash, one size fits all, ultimate flexibility. The incentive scheme should be transparent and largely geared to the personal contribution of the individual, not corporate performance, only. Then, you will have no worries about shareholder agreements, raucous meetings, dissenting rights, oppression remedies, corporate opportunity claims, voting deadlocks, etc.

Spousal or other family shareholdings are different, but tax and estate planning should occur before the share certificates are bashed out.

Details, Details, Details: While some visionaries and deal-makers attract media attention as business wizards, the hallmarks of a successful small business owner are perseverance and attention to detail.