Business law is a general term that can refer to any and all aspects of creating and operating a business, including acquisition or startup, through to advising as to best legal practices, the protection and promotion of a business, until its sale or disposition upon retirement.
Our offices can assist with the creation of limited liability corporations, partnerships, and joint ventures… including acquisition and sale of existing businesses, commercial lease agreements, banking and loan documents, debt collection, and defense from third party claimants.
Businesses typically operated as either a proprietorship or as a corporation. The practical distinctions are set out below:
Proprietorships
An individual may legally carry-on business in New Brunswick using either their own name or a registered business name.
Businesses that make use of the proprietor’s personal name as such as “Dave’s Plumbing” or “Johnson Electric”, are not required to register such business name.
If a unique business name is chosen, which does not identify the proprietor operating under the name, such as “Acme Electric,” the business name must be registered in New Brunswick under the Partnership and Business Names Registration Act. Failure to do so is a statutory offense punishable by a fine [Section 9 of the Partnership and Business Names Registration Act.]
The rationale behind the prohibition is simple: the public have a right to know who they are legally dealing with. In the case of a proprietorship, which is made difficult if the business name chosen does not identify the proprietor.
A “business” operated by a proprietor is not a distinct legal entity apart from the proprietor. Even if a business is operated under a registered and unique business name different from the proprietor, the individual remains legally and personally liable for the actions and obligations, including debts, of the business.
Business names are registered by applying to Service New Brunswick under the Partnership and Business Names Registration Act.
Corporations
In New Brunswick, a person or persons may also choose to create a corporation under the Business Corporations Act to carry on a business Legally, a corporation is deemed to have the same legal rights and independent status of a person. As a consequence, legal responsibility for the actions and obligations of the corporation falls on the corporation. In some cases the directors and officers of the corporation may be held personally liability for their actions on behalf of the corporation.
The liability of the shareholder(s) are normally limited to the amount of their investment in acquiring ownership of shares in the corporation.
A corporation is created by its owners, referred to as its shareholders, and the corporation is managed and operated by its officers and directors.
In the case of a small corporation, the role of the owner, shareholders, managers, directors, and officers may in fact be the same person.
However, in other cases, the officers and directors can be persons different from the owner(s) of the corporation. For example, many large publicly traded corporations such as General Motors or IBM have officers and directors who may not actually be shareholders or owners of such corporations, whose only role may be to manage and direct the Corporation on behalf of the shareholders as owners.
While individuals are permitted to file their own application for incorporation on the Service New Brunswick website, issuance of a certificate of incorporation through such method in itself does not satisfy all of the documentary requirements imposed on a corporation under the Business Corporations Act.
Additional requirements include the constating of the corporation by creation of a corporate minute book (section 18), creation of by-laws (section 61), creation and issuance of the shares to the subscribing shareholders (section 22), and documenting the major decisions of the corporation at both its initial meeting (section 62) after creation of the corporation, and on an ongoing basis, by written resolutions of the officers, directors, and shareholders. Failure to do so is a statutory offense (section 175 and 176).
Proprietorship vs. Corporations
There many pros and cons to both proprietorship and incorporation. It’s best to consult with both your lawyer and accountant to evaluate your individual circumstances and needs.
Starting a New Business or Buying an Existing Business
The creation or acquisition of a business either as a proprietorship or as an corporation, has many pros and cons, with the best time for consultation with a lawyer being before making a decision to start or acquire a business, who can thereafter guide, advise, and represent you through the process.
The best starting point is an initial consultation with both a lawyer and accountant to evaluate your individual circumstances and needs.
Appointments can be pre-booked through our website and are available in the office, by telephone, or by Zoom meeting.