There is a shocking myth swirling around entrepreneurs in the City of Toronto. It appears that business owners everywhere believe that there is no point in getting legal advice until their business is huge. We don’t know where it started and we don’t know who told you it was true, but we’re here to bust that myth wide open.
Why you shouldn’t wait until you are successful to build your business right.
There are many reasons to structure your business correctly well in advance of that “taking over the world” point. Here are the TOP 3 REASONS:
1) Plan your organization to hedge for aggressive growth.
You have all the pieces in place, your gas tank is full, and you feel your company is ready to blast off.
Much like a space shuttle, making tweaks and fixing parts is much less costly on Earth than it is after you hit the stratosphere. Restructuring, checking for mistakes and planning for liability are much cheaper and more efficiently done BEFORE your company takes off rather than after.
In fact, much of the work that can be done on a tax neutral basis becomes more difficult and sometimes impossible to do after your company takes off. This includes setting up your personal finances to protect your family from paying a huge portion of your earnings in taxes. Steps, such as freezing your assets now for the benefit of your personal tax planning, can be done quickly and efficiently before you have a large group of assets to manage.
It is also easier and more straight forward to protect yourself from law suits, up front, BEFORE you get assets and have people coming after you. You do this by segmenting your operations and your assets: you run your operations under one corporation, and hold your assets in another.
2) Plan your organization to work better with banks.
Some people confuse working with banks and liability management. One client was worried that splitting operations and assets between corporations would hurt their position with the banks: this was an incorrect assumption. Banks understand corporate structure; if you set your company up properly, the bank will actually look at you MORE FAVOURABLY. We simply have to ensure that the shares are issued in a way that the bank can efficiently secure the loan they give you against BOTH your operations and assets.
Your start-up may be… starting up… using a “lean” start-up model, or leveraging friends and family dollars. Eventually, you will want to get a loan from a bank. It is important to understand how banks work and make sure your corporation is set up properly far in advance of your loan application.
3) Plan your organization to minimize tax liability.
We used to say there are 2 things in life that are certain: death and taxes. But there is a third thing that is just as bad as both: AUDITS. If you are in business, you will invariably be audited. Maybe not today, maybe not tomorrow, but one day soon. Structuring your company properly BEFORE the cash starts rushing in is key and will save you THOUSANDS in extra fees that you will begrudgingly rush to pay when you are staring down the barrel of an audit.
We will set up your corporation properly from the get-go, and give you a roadmap to success. All you have to do is gas up and drive. Contact the team at Grinhaus Law TODAY for a consultation to discuss your business.
PLEASE NOTE: THIS IS NOT INTENDED TO BE LEGAL ADVICE AND SHOULD NOT BE RELIED ON AS SUCH. IT IS IMPORTANT THAT YOU CONSULT WITH A LICENSED PROFESSIONAL.