Thursday, July 2nd, 2020

What to do when your business grows up

By Chris Green on Apr 05 2010 • Filed under Chris Green's Legal Basics

There comes a time in a young woman's life when she is forced to abandon skin-tight jeans and a “barely there” top in favour of a modest skirt and blouse and sensible shoes. Such is the tyranny of growing up and joining the workforce. 

The same thing occurs in the life of a business. There comes a time when the home-based proprietorship, with the clip art letterhead and perforated-edged business cards, has to grow up. An early symptom, like the first blush of puberty, is the realization that the annual gross revenues of the fledgling enterprise are crowding in on $30,000. 

It's time to register for the GST (soon to be HST), but look on the bright side: now you will be able to claim all your input tax credits! (Funny what gets adults excited, isn't it?)

Its also time to take a hard look at your business structure. Is $60,000 a year in revenue a realistic possibility? If so, you are leaving a lot of money on the table for the tax man if you forge ahead as a proprietorship. Most accountants will tell you that they can save you money if you incorporate your business, once that threshold is reached. 

And, just as adults think more about their reputation than most teenagers do, a maturing business needs to think about protecting its name and brand. Regrettably, a simple trade name registration, which launches a proprietorship, offers absolutely no name protection. The Trade Name registration database is considered to be junior to the corporate name database, and a name reservation submitted to the corporate database won't even recognize existing registered proprietorships, so, for grown-up name protection, you are going to need to incorporate. 

Then too, an adult tends to obey the law, even when no one is watching. A mature business needs to do the same. No more "off the books" or "under the table" deals, no more fudging the payroll with "independent contractors" or friends working for cash. Growing up means saying good-bye to trying to fly under the radar by the seat of your pants. It's time to become compliant, and set yourself a stodgy foal of being a good corporate citizen 

What are some of the other things that grown up companies do? Well, they have a privacy policy, and are compliant with PIPA, the Personal Information Protection Act. They know what personal information they collect and why they need it , and they know how to securely store, and ultimately destroy, such information. They are well-versed in personal information policy because, of course, they have a coherent credit policy, that meshes with their complete and well-drafted contracts, work and purchase orders, and invoices . Not only that, but all of the staff are singing from the same hymn book, because the grown up business has a “policy and procedures” manual. 

So, what stage is your business at? Toddler? Sullen teenager? Thriving thirties, or aging Boomer?

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