You get this great idea for a company and decide to start up, make business cards, create an email and start doing business. It’s a great idea and your company starts to thrive. Oh no, something bad happened and now you are being sued personally. Next thing you know there is a Writ filed and they are trying to sell your family home.
The scenario above is the “worst case” scenario but it happens more than you think. How can you protect yourself and your family home? You need to incorporate.
Sometimes coming up with a specific name can be difficult, so you could always start with a numbered company. Just because you have a numbered company, doesn’t mean that you can’t operate with a name. For example, I could incorporate 1234567 Ontario Inc. and have a designing business and then use the name Allan Designs on my business cards etc. However, you have to make sure you do it correctly.
Lots of times people will register a sole proprietor business name but they don’t understand that doesn’t protect them personally from liability for the business’ actions. When they realize this, they will then incorporate and the corporation takes over the busines name. When that happens, it is important that the sole proprietor business name gets cancelled and then registering the name with the corporation.
Of course, there are certain things that directors of a corporation can still be liable for such as failure to remit taxes, pay employee wages, environmental issues and now most recently, CASL violations.
While incorporating doesn’t fix everything, it sure gives you a bit more protection than being a sole proprietor.
Christine Allan, Law Clerk