Basic Nuts and Bolts of Starting a Company

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Nuts and Bolts of Starting a Business

Presented by:

Tony Redpath

Vice President, Partner Programs

MaRS Discovery District

29 October 2008

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Basic Premise:

 When you start a business you have to fit into an existing ecosystem.

 This means establishing numerous links with different groups:

 Customers

 Suppliers / Providers

 Government

 Regulatory bodies

 Trade Associations

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Your Ecosystem

You Inc.

Your Suppliers

Your Customers

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Getting Incorporated

 Two choices:

 Federal incorporation

 Canada Business website

 http://www.canadabusiness.ca/gol/cbec/site.nsf/en/index.html

 Canada Business Corporations Act

 http://corporationscanada.ic.gc.ca/epic/internet/incd-dgc.nsf/en/h_cs01914e.html

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Getting Incorporated (cont.)

 Two choices:

 Provincial incorporation

 Service Ontario website

 http://www.gov.on.ca/ont/portal/!ut/p/.cmd/cs/.ce/7_0_A/.s/7_0_252/_s.7_0_A/7_0_252/_l/en?docid=STEL01_033449

 Business Corporations Act

 http://www.gov.on.ca/ont/portal/!ut/p/.cmd/cs/.ce/7_0_A/.s/7_0_252/_s.7_0_A/7_0_252/_l/en?docid=STEL02_163189

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Getting Incorporated (cont.)

 A third choice – for the future:

 Delaware incorporation

 Needed to attract US investors

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The Tax Man Cometh ….

 Regardless of where you are incorporated, you will have to register your company with a variety of tax collectors:

 Federal Corporate Tax

 Provincial Corporate Tax

 GST/PST

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Lesson number 1: Get Help!

 “The incorporation process can be very complex. You may wish to obtain legal and tax advice to assist you with the preparation of the incorporation documents and shareholders' agreements.”

 Canada Business website

 Ballpark cost to hire an accountant / lawyer to handle all the above paperwork is $800 - $1500

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Your Ecosystem

You Inc.

Your Suppliers

Your Customers

Federal and Provincial Govt.

Accountant

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Do you have co-founders?

 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 responsibilities

  Assignment of Intellectual Property

There are many other issues that can be covered in a shareholders agreement (see Term Sheet lecture)

Legal advice is highly recommended

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Your Ecosystem

You Inc.

Your Suppliers

Your Customers

Federal and Provincial Govt.

Lawyer Accountant

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Are you going to have employees?

 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)   http://www.wsib.on.ca/wsib/wsibsite.nsf/Public/EmployerRegisterWSIB

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Your Ecosystem

You Inc.

Your Suppliers

Your Customers

Federal and Provincial Govt.

Lawyer Accountant

WSIB

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Company Name Registration

 Selecting and registering your business name

 Canada Business website   http://bsa.canadabusiness.ca/gol/bsa/site.nsf/en/su06937.html

 Trademarks, patents

 Canadian Intellectual Property Office website   http://www.cipo.ic.gc.ca/epic/site/cipointernet-internetopic.nsf/en/wr00034e.html

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Are you doing research and development?

 Scientific Research and Experimental Development tax credits (SREDs)   A major advantage for Canadian companies

  http://www.cra-arc.gc.ca/sred/

  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 corporation (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

  Scientific Audit and Financial Audit

  To qualify for the SR&ED program, work must advance the understanding of scientific relations or technologies, address scientific or technological uncertainty, and incorporate a systematic investigation by qualified personnel.

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Networking

 You need to establish a commercial network (just as you had an academic network)

  Trade Associations

  Trade Shows   Scientific Conferences

  Regulatory Bodies

  Your Bank

  Regional networking organizations (e.g. MaRS)

  Professional bodies (e.g. PEO)

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Your Ecosystem

You Inc.

Your Suppliers

Your Customers

Federal and Provincial Govt.

Lawyer Accountant

WSIB

Bank Trade associations Trade Shows Conferences

Regional Networks Regulatory Bodies

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Some Don’t’s …

 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 mates – you are not building a research lab, you are building a company