Who hasn’t thought it at least once? At the end of a frustrating work day, a vacation cut short or a long commute, it’s hard not to contemplate the advantages of being one’s own boss. If you’ve gone past pondering to the planning phase, and decided to leave the workaday life behind in favour of starting a small business, there are a few things to consider before you get your company cards printed.
Pick a Name
What’s in a name? No offence to Shakespeare, but when it comes to a small business, more than you might think. Your new company should have a name that is recognizable, and unique without being obscure. You may also need to register the company’s name (and possibly the structure) before you can receive a loan from a bank or finalize lease agreements.
Danielle Unger, a learning resource specialist with AMA Registries, says there is a formula to choosing a name: “You need a descriptive element, a distinctive element and a legal element,” she says. These elements describe what the business does, set it apart from other businesses and identify the legal structure (that’s the “Inc.” or “Ltd.” that follows the company name – more on that later).
To make sure your chosen name isn’t already in use, perform a NUANS, or Newly Upgraded Automated Name Search, to find out which names are available and to make sure you won’t infringe on anyone else’s trademark. Some business owners have found themselves on the wrong side of a lawsuit when their name was too close to a major brand – so if you were thinking of McCoffee or Sambucks for your new coffee shop, it’s time to go back to the drawing board.
Choose the Right Format
You may be starting a small business, but there is practically no end to the very large decisions you will have to make in the planning stages. One of the biggest is whether you want to run a sole proprietorship, a partnership or an incorporated company.
A sole proprietorship is the simplest model if you plan to operate your small business solo. The main drawback is liability – a sole proprietor is personally liable for debts and obligations related to the business. So if the business fails, it could cost you.
A partnership is another way to go, if you plan to operate the business with a partner or partners. Under this format, partners take on a pre-determined portion of liability, as set out in a partnership agreement.
Incorporating involves more time and resources, but it creates a separate legal entity. This means that in most cases, shareholders aren’t personally liable for the debts, obligations or acts of the corporation. A corporation’s name must include the term “Limited,” “Ltd.,” “Incorporated,” “Inc.,” “Corporation” or “Corp.” to describe the specific legal structure (for more information on this, refer to the Business Corporation Act: qp.alberta.ca).
“You can also register a company as a sole proprietorship today and if you decide to incorporate later, you can do that,” Unger says.
Confused yet? Unger suggests consulting The Business Link, a not-for-profit organization supported by the federal and provincial governments, for advice on which model may be best for your company.
Insure Your Bottom Line
Taking a startup to opening day is a complex process. You have to decide on a location, secure financing and hone your business plan to woo potential investors. With all of that big-picture thinking, don’t neglect the small-but-vital elements – in particular, insurance. Before you start moving boxes into your storefront or purchasing supplies for your startup, you should have a plan in place to protect it. And because there is much greater variety in insurance plans for businesses than for homes, it may take more time than you think.
Diane Lennie, administration manager with AMA, says many insurers offer packages for different types of enterprises – retail, for example. But, depending on your business, a customized insurance plan may be the better way to go.
If your business will be based in your home, you can’t rely on your home insurance to protect company assets. “Most home insurance policies exclude property related to a business,” Lennie explains. If you have stock, samples or equipment used for business, your home insurance won’t cover those items. “That includes tools if you’re a contractor, computers – anything that you would use in order to carry out your work, as well as anything you sell,” Lennie adds.
If you’re worried about insurance costs eating away at future profits from your home-based business, don’t be. “In some cases an insurer can put an endorsement on a home policy to extend coverage to include business activities. That includes liability,” Lennie says. So if you were teaching piano lessons in your home and a student tripped and fell, the endorsement (sometimes called a “floater”) would cover that.
Bring on the Benefits
In the 1996 movie Jerry Maguire, the lead character convinces a colleague to quit her job and work for him at his new venture. In a flush of initial enthusiasm, she agrees and walks off the job. But it doesn’t take long for reality to set in and she asks, “This new company . . . will there be a medical plan?”
It’s a worthwhile lesson for entrepreneurs: no matter how passionate both you and your employees may be for the job, enthusiasm can quickly wane if a few key details are not in place. An extended medical and dental plan offers employees a sense of stability that might otherwise be lacking in a startup. It’s also a recruitment tool. In addition, as Yves Beauchesne, manager of AMA’s Life and Living Benefits Program, points out, “If it’s your own business, you have no personal coverage, and you should be thinking about what you can do for yourself and your family.”
That’s particularly important if you, the owner and likely key employee, should have to leave the business because of illness, injury or another matter. If you’re fortunate enough to have a job while you’re planning your new business, talk to an insurance advisor about your disability and life insurance options before you hand in your pink slip.
If your new enterprise only has a few employees, AMA offers individual benefit plans. While these plans are managed as a group and paid for by the company, they offer a comforting advantage over traditional group benefit plans: “The costs associated with any claims are shared by all the policy owners, not just your business,” Beauchesne says. “This means there won’t be a significant premium increase on the annual renewal date. Stable employee benefit premiums mean fewer uncertain expenses to worry about when starting a business.”
Whether you decide to go with a group plan or a series of individual plans, employee benefits can be deducted as a business expense, so be sure to discuss this option with your accountant.
Hit the Road
Most business owners spend considerable time and money deciding how they are going to present the company to the world: elements such as the storefront, advertising, logos, front-line personnel and even letterhead all have an impact on customers’ impressions. What they may not consider is the impact of an employee getting behind the wheel of a company vehicle.
“If you’re going to hire someone to drive a company vehicle, you want to make sure they’re properly trained for the vehicle they’re driving,” says Ron Wilson, manager of operations for AMA Fleet Safety. “Driving is one of the most dangerous things we do every day. If people are driving a company vehicle all day, it’s probably even more dangerous because they are spending a lot of time on the road.” This is especially true if the company vehicle – for example, a cargo van with few windows – is different from what an employee is accustomed to driving.
Offering driver training shows employees you are committed to them and demonstrates to customers and suppliers that the company is managed conscientiously. Wilson suggests that employers continue the drive-safe culture when training is over by creating a road safety policy that includes training, mentoring and a series of expectations for employees whenever they are operating a vehicle. These can include performing a vehicle walk-around and daily vehicle inspection, and carrying a road safety kit.