Corporate

Business lawyer best bet for contracts, incorporation process

By AdvocateDaily.com Staff

While it seems simple to incorporate online or download sample employment contracts from the internet, working with a lawyer when setting up a company can help ensure all aspects of the process are completed in full and tailored to the business's specific situation, Toronto business lawyer Inga Andriessen tells AdvocateDaily.com.

As Andriessen, principal of Andriessen & Associates, says, it is all too common for new companies to look to the web for template documents, such as employment contracts or non-disclosure agreements, or to attempt to incorporate online without the assistance of a lawyer.

“It appears the first step in searching for lawyers is Google, which leads to ‘do-it-yourself’ websites,” she says.

However, says Andriessen, the problem with many ‘boilerplate’ employment contracts is they may not be enforced by Ontario courts.

“If you use a non-Canadian precedent, you’re not likely covering issues that will come up in Canadian courts. In an employment agreement, for example, you could end up paying common law notice — approximately one month per year of service — when you were trying to pay nothing because you cannot pay zero in lieu of notice in Canada,” says Andriessen.

Similarly, she says, “You can find minutes of settlement and release precedents online. Will they be enforced if someone challenges them? Will a court find against you because of some of the terms used when you 'draft' it?"

While it is possible for a company to click a button online to incorporate, Andriessen cautions that a lot more planning needs to go into the process to ensure it is completed.

“Do you know how many directors you should have in the corporation, how many classes of shares you should have and why? Do you know that filing articles does not finish the incorporation?”

A business lawyer can help new companies determine where to incorporate — provincially or federally, says Andriessen, as well as what classes of shares they need and what rights those shares will have.

“They also need bylaws to organize the company and resolutions to empower it to take certain actions, such as borrow money,” she adds.

Ultimately, Andriessen says, companies will likely find significant value in hiring a business lawyer to draft their contracts and to help them incorporate from the get-go, rather than to just address any issues that may come up later on.

“It’s cheaper to get it done right the first time, rather than pay to have it fixed.”

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