5 Legal Considerations for Small Businesses

As small business owners, it can be overwhelming navigating the legal side of your business.

It’s no secret that laying a solid legal foundation might not be at the top of your ‘to do’ list as a small business, given how much you already take on day to day. But that doesn’t mean you can or should ignore it. Understanding what you need to consider at different stages of growth and implementing them as soon as you can will save you money, reduce your long-term risk, and give you the confidence to grow knowing you’re legally protected.

Here are a few things to keep in mind at different stages of growth in your business:

As you grow, you will likely need a team to grow with you. Hiring support is often the only way you can scale and get the specific expertise to carry out and hit your business objectives and goals.

The first question I ask my clients when they need to hire is, “What kind of support do you actually need?” Do you need a contractor or an employee? To learn about the difference, I wrote an article that defines both and can guide you in this decision. Once you know what kind of worker you need for your business, you’ll need to ensure you have a proper agreement in place that is clear about what the relationship is and clear about the work they’ll be carrying out to help your business grow. Not having the proper agreement, or misclassifying the worker in the first place, can have expensive consequences down the road. It’s best to get this right from the get-go.

The most common question I get as a lawyer is, “Should I incorporate?” And my first response is always, “It depends.”

There are three common legal structures in Canada:

• (1) sole proprietor (you’re going it alone, and you and your business are one and the same)
• (2) partnership (you’ve teamed up with one or more people with the intent to make a profit)
• (3) incorporating a new company, which is a separate and distinct legal entity with its own legal rights and responsibilities

For some small businesses, it’s important to separate themselves legally from their business right away and incorporate a company. This includes instances where they are operating in a particularly risky industry (like food, construction, or fitness) or hiring employees and want to separate their personal liability and assets from that of their business.

For other business owners, incorporation makes sense once their business is growing and bringing in sufficient income such that they are in a financial position to take advantage of certain tax benefits available to corporations. Unfortunately, there is no “magic income number” and the decision to incorporate that flows from a financial reason is best made with the advice from your accountant.

Forming a new company adds an extra layer of complexity to your business, so it’s always a great idea to make this decision after talking to your accountant and lawyer to make sure that the timing is right to support your growth.

No matter what business you’re in, your success is likely dependent on providing excellent customer service. As your business grows, it becomes more important to focus on the organization and refinement of your systems. For example, If you provide 1-to-1 client services, you might want to refine your payment terms or how you deliver those services. If you are in retail, you might want to change your refund and returns processes over time. Refining your client processes and systems is important when you notice issues popping up, but it is especially important when you’re growing and want to limit the amount of resources (time, energy and money) you spend responding to these issues.

I recommend taking some time to review your touchpoints with your customers and ensure your contracts and website clearly set out the expectations of that relationship. This might be refining and tailoring your client contracts or updating your terms of use and policies on your website.  The more we can keep these processes organized and flowing smoothly, the more time you can spend on being proactive, versus reactive in your business. A good starting point is to consider the last issue that popped up in your business: is there a way you could have avoided this with clearer communication? If so, go make that change now. Your future self (and your team!) will thank you for it.

As you grow, get in the habit of checking-in with your customer processes to ensure they are supporting you.

If businesses want to grow these days, having an online presence is vital. Whether that means adding an e-commerce element, growing your email list, or increasing your presence on social media, it’s an important and impactful way to take your business to its next level.

If you are online, or going to be soon, it’s important to understand the legal requirements that come along with that. For example, if you have a website, you are legally required to have a privacy policy that sets out what data you collect from your users, how you collect it (email list sign-ups, cookies, or other tracking tools) and how you use it. Not the most exciting part of your website (#fineprint), but a legal necessity!

If you sell products or services online, your terms of use and FAQ section are a great way to set out your policies about refunds, exchanges, shipping and related disclaimers. Your terms of use are also where you include important clauses to protect your ownership rights over the content you provide on your website, like your blogs or free resources you provide your visitors.

It’s important to not only be aware of what you are legally required to have online to protect your business, but also to ensure these support and reflect your processes too!

The more you grow, the more important it is to protect your brand and the reputation of your business. You can do this by registering your trademark. A trademark is a combination of letters, words, sounds or designs that identifies your unique business from others in the marketplace (like your name logo!).

The best way to protect your brand is to register it as a trademark in the countries you do business in and as early as you can in your business. This ensures that you are the only one with the legal right to use your trademark and can take legal action against anyone else using your name or logo or who is trying to imitate your business.

On the flipside, if you are in the very early start-up stage, you should always conduct a thorough trademark search of your proposed business name to ensure it’s available and not being used by anyone else. Nothing is worse than having your heart set on a name, investing in design and branding services, only to realize the name is already in use and trademarked.

Whether you’re just starting out or scaling your business, registering your trademark is a great idea to ensure that you can confidently scale knowing you’ve protected your brand the best legal way you can.

As business owners it can be so easy to feel overwhelmed and feel like the ‘to-do’ list never ends – usually because it doesn’t! That’s why it is so important to celebrate the wins along the way. No matter how big or how small, we must recognize and be proud of the steps we are taking forward in our business growth journey.

Whether it’s launching that new product, bringing on a team member, or tweaking a clause in your client contract or on your website that you’ve been meaning to get to, treat these like big wins and celebrate them. Even taking the time to read this article and understand the different legal considerations for your business and feeling more confident in the legal steps you might need to take as you grow is worth celebrating.

Get in the habit of looking back and celebrating how far you’ve come — this will serve to fuel your fire to take your business to the next level and beyond.

Jaime Bell is a lawyer and the founder of Wild Coast Law, a business law firm based in British Columbia. She is also the founder of Contracts Market, an e-commerce store that provides legal contract templates for small businesses. Jaime’s mission is to make access to legal less intimidating, more affordable, accessible, and fun. In her spare time, you can find Jaime chasing her dog, Osa, through the forest or up the mountains on Vancouver Island, where she now calls home.