Legal Considerations For Service Professionals
Starting A Business Is A Challenging Experience.
If you’re a professional services provider, whether in healthcare, financial services, consulting, or any other myriad of industries, branching off on your own is a daunting, but rewarding experience.
Entrepreneurs often find themselves trading in a stable, guaranteed income to pursue a livelihood in their area of expertise. Reasons can range from wanting to set your own hours to a desire to kindle the entrepreneurial spirit; regardless of why you want to jump into the small business world, any reason is a good one!
As a service professional, you want to spend your energy focusing on the craft that you’re good at. That’s why, when going into business, knowing what important legal documents lie ahead is all the more important.
Background
Chances are, if you’re reading this blog, you’ve already made the jump, or you’re getting ready to start your venture. Most professional providers want to spend their time and energy on delivering exceptional service to their clients – without having to worry about all of business and legal hurdles to get over. We’re here to make those hurdles a little smaller, to get you informed on the various legal areas that will inevitably have an impact on your business.
We took the time to give a quick overview of the different areas of the law that will affect your business, so when the issue or contract comes up, you’re not take by surprise. Knowing how the law can work with your business (instead of against it) is important to finding long-term success and stability as you grow your company.
General Business Law
The first question you should be asking yourself is “how do I want to structure my business?” Sometimes it’s as easy as creating content and selling it to your friends and family, no fancy bells or whistles. However, if you’re looking to grow your company, protect yourself from liability, and take your entrepreneurship to the next level, being deliberate in how you organize is important.
There are generally three ways that small businesses can be structured:
1. Sole Proprietorships
Often, the least complicated method of business organization. One individual, as the sole proprietor, is in charge of all business-related activities. The business lives and ends with the sole proprietor, and as they are one in the same, business taxes and liability are directly attributed to the individual.
Generally, these structures are appropriate when the business is just starting out, smaller in scope, or if you’re not entirely sure you want to take the full plunge into the small business world. As there are no complicated set-up procedures, fees, or costs, it is easy to test run some ideas through this avenue. However, with the business liability (i.e., if you cause injury to a customer) being attributed back to you, you open yourself up to a lot of risk.
2. Partnerships
Partnerships feature two key similarities as a sole proprietorship: unlimited personal liability, and business income attributable directly to the individual. The major difference being, as the name implies, two or more persons carrying on a business together with a view to profit (as opposed to the long individual).
That is not to say that partnerships are inflexible; partnership agreements can be drafted at the outset to ensure that certain roles, rights, and responsibilities are given to specific partners, and additional provisions that set out what is to happen in the event of liability can also be drafted.
3. Corporations
Corporations are the vehicle of choice for many proprietors to operate a business in. Although they require annual upkeep, maintenance fees, and additional administrative tasks, corporations are nonetheless preferred. In the eyes of the law, corporations are separate legal entities, meaning that they can enter into contracts, have bank accounts, and are required to pay a corporate tax rate. The two main benefits of a corporation is its flexibility of business structure (through shareholders, directors, and officers) and limited liability (investors are only liable for the amount invested, their personal assets remain untouched).
A key consideration when setting up a corporation is how to get paid. This is particularly important if the corporation is a solo-show, meaning that the entrepreneur wears the hats of director, shareholder, and officer all at once. Entrepreneurs can either pay themselves through corporate dividends or by being the corporation’s employee and receiving a wage. Generally, total taxes are lower on dividends, but you can read more about the payment structure in this blog post.
Intellectual Property
As a creative professional, your livelihood is wholly dictated on your craft and what you can create for others. It is crucial to protect whatever services or products you are selling, and to make sure that that you know the legal boundaries of what will and will not apply to your particular situation.
Copyright
Copyrights protect works that are fixed onto some form of accessible medium (physical pages, online, etc). They generally last for the entirety of the author’s life, in addition to 50 years following their death. When you are the owner of the copyright, you control how that created piece of work is used to protect its value. If someone else wishes to use your work in a commercial venture, they must get your explicit permission (and may have to pay any fee you require) to do so.
What’s Protected:
- Literary Works: Books, computer programs, other text-based materials,
- Artistic Works: Paintings, drawings, photographs, and design,
- Dramatic Works: Movies, plays, screenplays, and scripts,
- Musical Works: Instrumental compositions without lyrics, and
- Others
Trademarks
Trademarks protect your business’ reputation and brand. They are combinations of words, logos, images, or slogans used in the marketing of your business to consumers at large. They are the combination of whatever representation you want for your business that distinguishes the goods or services you have from your competitors.
Although trademarks only protect the actual brand instead of all of the processes, procedures, and intellectual property required to create whatever product you are protecting, they are still extremely important. To get the full degree of protection, you will want to register your trademark with the Canadian Intellectual Property Office, so if someone copies or disparages your business’ logo, you have an efficient way of seeking recourse.
Important Contracts
Regardless of the type of business or industry you’re in, every venture will have a series of important contracts that their entire operations will centre around. Chances are, you will want to spend a good amount of time making sure these contracts are air-tight, and work in your favour!
Specifically, for the creative industry, we will look at three:
1. Licensing And Royalty Agreements
These contracts allow a person or business to monetize their intellectual property (e.g., copyrighted computer code, photographs, or design materials or their trademarked business logo). Licensing Agreements can also be used to provide exclusivity rights to the individual who receives the license, so that for a certain period of time in a certain location, they may have all of the rights associated with the property. The primary purpose of this agreement is to make sure you get paid, stay protected, and clear outline the terms of what will happen in the event something goes wrong.
2. NDA And Confidentiality Agreements
Non-Disclosure Agreements are contracts between two parties that prevent private information (whether that be trade secrets, projects in the works, or even business ideas) from being shared with anyone outside of that agreement. NDAs can really apply to anyone: employees, contractors, consultants, and potential business partners. If you’re a creative, and you are in the middle of developing a new technology or design piece, in order to get backers for your business you may have to divulge the inner workings of your project. The last thing you want is for the potential business partner to rip off your idea and set-up another entity in direct competition of you.
3. Terms Of Service
Found on websites all over the internet, and a staple if you’re running a business with any kind of online platform. These are non-negotiable, unilateral contracts between you, the business owner, and the visitors who access your website. Because you can’t customize every single interaction between someone who interacts with your website, a generic, standard form document will lay out all of the terms to accept. This is particularly important if an issue happens while a visitor is using your site, and it adds predictability and certainty to your online presence.
