Ten Legal Issues to Consider Before Launching your Tech Start-Up
By LawyerLinx,
February 03, 2016

The idea of building a company from the ground up is very appealing to a large number of Canadians. The massive success of companies such as Facebook has inspired countless would-be entrepreneurs to try their hand at becoming the next big start-up. However, the path to start-up success takes more than a good idea and a business plan. Overlooking legal planning can result in possibly fatal complications for your new business. The right lawyer can help you navigate the start up world and ensure you are set up for success. Before setting out here are a few issues to consider.

1. Ownership of Intellectual Property

Who owns your idea or technology? Due to the unique nature of tech start-ups, an in-depth analysis of the property rights of your intellectual property is crucial. Any issues uncovered at this stage should be addressed early on to remove doubt about the ownership of the intellectual property. Once you have determined “clean” title you will want want to protect it through the use of patents, copyrights and trademarks.

2. Name Your Business

Do a search of potential business names before you launch your start up. You business name is an important decision to make and you do not want to be infringing on any copyright or trademark laws once you have found the perfect name. This applies for domain names as well. Doing a search early on can prevent you from running into unwanted surprises down the line.

3. Business Structure

In Canada there are four main business structures, Sole Proprietorships, Partnerships, Joint Ventures, and Corporations. The majority of start-ups begin as sole proprietorship or partnerships. As they develop and grow, the founders may decide to incorporate the company. In regard to liability, taxes, and company objectives there are advantages and disadvantages with each structure- choose the form that best fits your business needs.

 4. Financing the Business

Now that you are ready to get started you will need funding to get your start-up off the ground. There are two main ways to fund your business, debt financing and equity financing. Debt financing involves securing loans from a lender, such as a bank, and paying back the loan plus interest through installments. Alternatively, equity financing involves raising capital through the sale of shares, ultimately giving the purchaser an ownership stake in the business. Each method has its own legal implications and should be considered with your lawyer. Also, you may want to do some research into government funding such as the Scientific Research and Experimental Development Program. These incentive programs are designed to encourage Canadian businesses to conduct research and development in Canada and can provide substantial benefits to your business.

5. Business Registration 

Be sure to register your business early on in the process. Getting the appropriate business license will ensure you are operating legally in your region. Be sure you have registered for your business number, GST/HST, income tax, payroll and import/export accounts, if applicable.

6. Terms of Use Agreement

A Terms of Use Agreement lays out the rules your customers agree to abide by should they use your service. A good Terms of Use Agreement will be clear and thorough and outline user rights and obligations as well as limits your liability for damages.

7. Privacy Policy

A Privacy Policy is a statement or a legal document that discloses the ways a party gathers, uses, discloses, and manages a customer’s data. Canadian legislation requires all business to have a privacy policy that complies with The Personal Information Protection and Electronic Documents Act (PIPEDA). Drafting a complete privacy policy is beneficial to you, the business owner, as well as your clients.

8. Obligations as an Employer

A common mistake made by start-ups is overlooking the fact that they are now an employer and therefore subject to relevant labour and employment laws. From the moment you hire your first employee you need to consider a range of employment related issues. These may include payroll, vacation time, employment contracts, restrictive clauses and confidentiality. Being in compliance with these laws will give you and your employees peace of mind.

9. Regulatory Compliance

Don’t forget that as an employer you have regulatory standards to comply with. In Ontario, these can include the Workplace Health and Safety Act, Occupational Health and Safety Act, and the Human Rights Code. Do your research and know what applies to your industry and region.

10. Stay up to Date

Laws change! Make sure you are up to date and informed on current industry news including relevant law. For example, Canada’s recent anti spam legislation came into effect the summer of 2014 and is especially relevant to tech start-ups. New laws and regulations can have a huge impact on how you run your business- don’t be caught off guard.

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This article should not be relied upon as legal advice - the comments may not be applicable to you and may not be up to date. If you have any questions, you should contact a lawyer.