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How to play well with others:Legal issues for foundersAnna Keller, Corporate LawyerLow Murchison Radnoff LLP
Working with others Raising Money
The secret…these are related!
Two major issues for Founders
Employees Contractors Partners Shareholders Investors Directors Officers (employees)
Ways to work with others
How we work with people depends on what type of business you operate:
Sole Proprietorship Partnership Corporation
Business Enterprises
You are the only founder! Employee Contractor
Sole Proprietor
More than one founder (partners) Employee Contractor
Partnership
All partners are not created equal (but the law thinks they are…)
Partnership law is outdated Every partner cannot run the business You can’t generally have investors It’s a trap! Doomed to failure…
Problems with Partnerships
Founders Employee Contractor Shareholder Directors Officers
Corporation
Corporations are separate legal entities. Corporations are their “own” person.
Corporation exists separate from the people who run/manage the corporation. Why incorporate? Manage Risk Limit liability Raise Money Franchise Taxes
Corporations – separate legal entity
Basic rights of shares: To vote at any meeting of shareholders To received dividends declared by the Board
of Directors On dissolution of the corp, to receive the
property of the corp remaining after creditors and other person with claims are paid.
If the corp only has one class of shares, everyone’s rights are equal.
Shareholders
Shareholders keep their shares forever, unless you have a shareholders agreement
Shareholders Agreement sets out the rights of the Shareholders
It is easier to get divorced in Canada than it is to get rid of shareholders…
Shareholders – are forever!
What are the end goals? Are they different for each person?
Do I need others?◦ Why do I need the person?◦ How long do I need the person?
What are the risks of working with others?◦ How well do I know this person?◦ Would I want to get married to this person?
How to decide?
