Starting a Business

Owning a business often means investing much of your own money, time and energy. Making your business a success can even be a life’s work. Have you thought about protecting what you’ve worked so hard to build?

Don’t let all those years of work vanish if something goes wrong. Plan ahead and do everything you can to ensure that your business continues to run smoothly.

Drawing up a partnership agreement

You’ve decided to start a business with one or more partners. But what would you do if one partner died, became disabled or left the business?

These and other events can lead to disputes that may jeopardize the future of your partnership or business. That’s why it makes sense to think ahead and draw up a partnership agreement.

• Why a partnership agreement?
  The purpose of a partnership agreement is to prevent disputes by determining the rights, responsibilities and powers of each partner. The agreement also anticipates certain situations and their impact on management of the business and sets out in advance how those situations must be handled.

• What’s in a partnership agreement?
  A partnership agreement determines such aspects as:
  • the rights and obligations of each partner, particularly regarding finances;
  • the duties of each partner;
  • what happens when a partner leaves or dies;
  • what happens in the event of bankruptcy.
  The agreement also includes all relevant information concerning management of the business, membership of the board of directors, and the purchase and sale of shares.
  
  You should also consider including a non-competition clause in your agreement. It will prevent a former partner from competing with you based on experience acquired while working with your business.

• Consult a legal advisor
  As with any other type of contract, we recommend that you consult a legal advisor when drawing up an agreement in order to make sure that it meets your needs. Your legal advisor will ensure that the agreement’s provisions are clear enough and worded in such a way as to avoid any potential misunderstanding.

You’ve just launched your business and probably aren’t covered by group insurance. If you become disabled or are diagnosed with a critical illness, will you have enough savings to offset lost productivity or clients? Disability or critical illness insurance allows you to plan for the unexpected and cover your business’ operating expenses should something happen.

• Disability insurance
  Superior Program Disability Insurance provides a source of income to replace your salary when you are disabled due to accident or illness. You may also supplement your coverage with Overhead Expense Insurance, the Hospital Benefit and/or other coverages.

• Critical illness insurance
  Our Critical Illness Insurance provides for benefit payment should you be diagnosed with a serious illness. This type of coverage allows you to focus on your recovery, sparing you any worry about the financial impact of your illness.

Most of the time, the success of a small or medium-sized business depends on a few shareholders (one, two or three) or on one key employee. The death of a key employee may threaten the continuity of your business activities and be highly detrimental in terms of company finances.

Taking out life insurance is one way to protect yourself against financial difficulty, whether you choose term or whole life insurance.

Life insurance can meet your needs for:

• Financing the application of a shareholders’ agreement
  Taking out life insurance to finance the application of clauses in a shareholders’ agreement ensures tax-free payment of the capital required to buy out the shares of a deceased shareholder. The death benefit will provide the funds needed to purchase the shares, eliminating the need for a loan, or to liquidate company assets in order to settle debt.

• Insuring a key person
  Taking out term life insurance on a person who holds a key position increases the financial security of a business. When a key employee dies, the resulting life insurance benefit can be used to cover temporary revenue losses while a replacement is being recruited and trained.

• Taking out collateral insurance
  Banks or creditors may require you to take out collateral insurance to secure repayment of a loan or line of credit should an owner die.

• Passing the family business on to the next generation
  Life insurance provides the necessary funds to cover the tax bill that comes when a family business is passed on to children after the owner’s death.

Drawing up your will

Drawing up your will is no problem at all compared to the time lost and the financial problems your business will face if you neglect this responsibility.

• Why?
  By drawing up a will, you make sure that your successor(s) respect your wishes regarding the continuity of your business. The instructions you leave will guide them in managing your business, which can carry on or be sold, as you wish.
  
  In addition, it is strongly recommended that you and your partners enter into agreements in this regard. If a partner dies, will you agree to share management of the business with his or her spouse or children? Without a will, the property of the deceased is devolved in accordance with common law statutes (or with the Civil Code of Quebec in that province),which may disrupt business operations.

• Consult a legal advisor
  A will is too important a document to draw up without the advice of a lawyer or notary, who can tell you what type of will best suits your needs. You’ll also be sure that your will is valid. Legal advisors know how agreements with your partners or shareholders may affect your estate. They also know your rights and how to protect them.

This information is provided for information purposes only and should not be considered legal or financial advice. For more information, contact a legal or financial advisor.