The Importance of Legal Advice

Obtaining legal advice when incorporating a company can be a wise investment. Here are a few reasons you should consider hiring a lawyer to assist you with your incorporation:

Lawyers won’t leave the job half-finished.

You’re not required by law to hire a lawyer to incorporate a company, but that doesn’t mean you shouldn’t. We’ve witnessed a lot of problems caused by people choosing to incorporate without a lawyer and for the lowest possible price. Here are SOME of the issues we’ve encountered over the years:

• failing to understand basic corporate maintenance and record-keeping requirements, leading to the corporation being struck from the corporate register (cancelled);
• failing to provide for a sufficient number of shares, meaning that further shares can’t be issued without costly changes to the corporation’s Articles of Incorporation;
• failing to provide for different and distinct classes of shares to allow for sprinkling of dividends (paying different amounts to different shareholders to limit the amount of tax payable);
• failing to issue shares and share certificates or require payment for shares, resulting in the corporation having no shareholders at all;
• failing to properly appoint directors, increasing potential personal liability;
• failing to complete corporate registers and ledgers as required by law; and
• failing to include standard restrictions that permit the corporation to remain as a private non-distributing corporation;

In almost all cases, the cost to fix the errors greatly exceeds the added cost the client would have incurred by hiring a lawyer in the first place.

Lawyers can provide legal advice.

Many incorporation websites have a tiny disclaimer stating that they’re not lawyers, that they can’t provide legal advice, and that you should obtain legal advice prior to using their services. The purpose of that disclaimer is to avoid liability in the event that they fail to set up your corporation properly, and to be clear that they don’t have the formal education or training that’s necessary to provide you with the legal advice you need when setting up a corporation. The disclaimer is usually in tiny font at the bottom of the page or hidden in their terms of service. Why not avoid the hassle and just incorporate your business with a lawyer in the first place?

Lawyers are accountable and insured.

Lawyers are bound by a strict code of conduct, are required to keep your information confidential, and maintain professional liability insurance. This is for your protection. If you incorporate using a website staffed by non-lawyers your recourse is limited, even if they’ve clearly made mistakes when setting up your corporation, which happens more often then you would think.

Lawyers have education and training.

Lawyers are required to meet high standards of education, training and qualification. This is helpful when dealing with something as important as setting up a new corporation, which involves much more than just registration. Using a budget website staffed by non-lawyers may save you a bit of money up front, but do you really want to trust the creation of your new corporation to someone with no legal training? If you choose to go that route, there’s a good chance that you’ll end up paying a lawyer anyway to try to finish the job and repair the damage.

Getting it wrong could be devastating for your business.

If your corporation is set up incorrectly or uses a basic structure that doesn’t suit your needs, it could lead to shareholder disputes, personal liability, tax issues, costly amendments, and other expensive problems. Luckily, these issues are avoidable if you get the right advice upfront.

All legal services offered through allincorporated.ca are provided by All In Business Law, an Alberta business law firm. For one flat fee, we register your corporation, make sure that it’s set up and organized correctly, and provide legal advice needed to help protect your investment.