After careful thought, consideration, and the appropriate advice, you’ve decided to incorporate your business – Congratulations! For many small business owners it’s an exciting time to be able to start the process of operating your business as a corporation.
So where does the small business owner start? Read on…
The Articles of Incorporation
This document is the foundation of the Corporation. This document describes the name of the corporation, limits on the business activity, the first directors, the types and quantity of shares a corporation may issue its shareholders, whether it’s a federal or provincial incorporation, etc.
Once the Articles are filed with either the federal or provincial government, a Corporation is born. But this is not everything. We’re just getting started!
Some small business owners may think that once the articles are filed and the appropriate level of government has issued a Certificate that nothing further is required. Why is this not the end of the process? My response – who are the shareholders? What are the rules that govern the corporation? Who are the officers? (i.e.: President, Treasurer, Secretary, etc.). Many small business owners, especially those that are sole owners of the business will respond to my questions and say “Well, I am”. However appropriate documentation is required to prove that such role exists.
Organizational Resolutions & Documents
These are the blueprints of the Corporation. These include: By-Law(s) – which deal with the general operating matters of the Corporation; the First Director Organizational Resolutions –which deals with the approval of by-law(s), allotment and issuance of Shares, appointment of Officers, determining the fiscal year end of the corporation, etc.; and the First Meeting of Shareholders’ Organizational Resolutions – which deals with approving the by-law(s), electing directors, appointing auditors or accountants, etc.
Once the above documents are executed – where do they go? Read on…
The Minute Book
The Minute Book is the filing cabinet of the Corporation. What is a minute book? And why is it important?
I describe a Minute Book as an autobiography of the corporation. It provides the life story of the corporation. The Minute Book is important for several reasons. The law requires the contents of the minute book to be updated on a regular basis. Near and dear to the hearts of many small business owners is the prospect of selling your business in the future for a sizeable profit. Well, guess what? Any buyer of your business will be advised by their legal counsel that the minute book be examined. If there are any issues or concerns, this may delay or hinder your business deal.
So where does this leave the small business owner? It is highly advisable to reach out to a lawyer knowledgeable in business/corporate law and have them assist you in establishing a Corporation and effectively maintaining a Minute Book.
After all, for almost all small business owners your business is the beginning of your road to prosperity – so let’s get it right from the start!
Stay tuned for the next blog posting on the role of shareholder agreements and why these are critical to the proper functioning of a small business…
*Please note that this is not intended to be legal advice, but a general, non-comprehensive discussion.