Blog

If you're planning to incorporate a company in the United States, this checklist will help guide you through the process by outlining the information and documents you will need. Although each state has its own procedures, the basics of incorporating a company are much the same throughout the country.

Information Required Prior to Filing the Incorporation Application

• Reserve the proposed name of the corporation and any additional trade names under which the corporation will be doing business. This may entail additional documentation and filing fees to register those trade names.
• Determine who the directors and corporate officers (or if an LLC, the members and managers) will be.
• Discuss with your business partners (if any) and your legal counsel if any special provisions will be included in the articles or in the company bylaws / operating agreement.
• Ensure that any compliance, licensing or regulatory requirements for the corporation’s business are met.

Documents to be Prepared

• Articles of Incorporation or Organization (depending if a corporation or LLC)
• Certificate of Disclosure
• Bylaws or operating agreement (depending on the type of entity)
• Shareholders Agreement
• Minutes of Organizational Meeting
• Subscription for Shares of Stock
• Application for Employer Identification Number / Federal Tax ID
• Corporate Minute Book
• Stock Transfer Ledger
• Stock Certificates

Once the documents are prepared, you can file them with the Secretary of State. Most states have an online filing option.

Roles to be Filled Before Incorporation

• Accountants
• Legal counsel
• Registered agent
• Bank, trust company, other financial institution(s)
• Investment broker and financial advisors (if required or desired)
• Insurance company (life, office contents, commercial general liability, etc)
• Auditors (if required or desired)

Things to Do Following Incorporation

• Hold an organizational meeting to issue shares, appoint the directors and officers, set the company's fiscal year end, and adopt the bylaws.
• Apply for a federal EIN (employer identification number).

Other Matters to Consider

• Determine whether the corporation needs to obtain a sales tax license.
• Decide whether the corporation qualifies for Sub-chapter “S” status.
• Review the statutes governing corporations to determine what the regular reporting requirements are, and be sure the dates are properly diarized for preparing and filing the appropriate documents.
• Order corporate seal.
• Get information on the “piercing the corporate veil” rules.
• Get information on state, federal and municipal laws, rules and regulations that apply to the corporation’s business (environmental, tax, import/export, etc).
• Learn how to properly dissolve / liquidate a corporation.

Image by Pixabay.com

What is a voting trust?

A voting trust is an arrangement under which legal ownership of shares belonging to one or more shareholders are transferred to a trustee, along with the voting rights attached to those shares, usually for a specified period of time.

The shareholders retain beneficial ownership of the shares and all other rights and benefits, except for the right to vote the shares. At the end of the trust, the shares are re-transferred back to the beneficiaries (i.e., the shareholders).

How can we set up a voting trust?

To establish a voting trust, the shareholders enter into a trust agreement with the trustee, setting out the provisions of the trust, transferring legal title of their shares to the trustee, and granting the trustee the right to vote the shares. In some voting trusts, the trustee may also be granted additional powers in order to accomplish the purposes of the trust (such as the authority to sell or redeem the shares).

What are the benefits of a voting trust?

A voting trust arrangement can offer a number of benefits to a company's shareholders. By consolidating the voting power of their shares, they can collectively hold a sufficient percentage of the company's voting shares that they would not have individually, which - as a voting bloc - would give them the power to force the calling of meetings, elect specific directors, and generally exert or safeguard control of the company.

Locking shares up in a voting trust can be used as a means to facilitate a corporate reorganization - or to avoid a hostile takeover of the company - by aggregating a certain percentage of shares into the trust, consolidating their voting power, and protecting them from being acquired in connection with a potential takeover bid.

A voting trust can also operate as a short-term proxy solution for a period of time during which the shareholders will be unavailable to attend and vote at meetings, or as a convenience. By appointing a trustee to vote their shares, the shareholders free themselves from the necessity of attending meetings, voting on key issues, and dealing with other responsibilities associated with share ownership.

A discretionary voting trust (also known as a "blind trust") can be used as a mechanism to resolve conflict of interest situations. In a blind trust, the trustee has full discretion over the trust assets (i.e., the shares) and votes the shares at arm's length from the beneficiaries of the trust (i.e., the shareholders).

Image by kzd from Pixabay

Starting a business partnership often begins with excitement, optimism, and shared ambition.

Maybe you launched a company with a close friend, family member, or trusted colleague. In the early days, everything worked well — you shared responsibilities, divided profits, and built something together.

But over time, things can change.

Differences in management style, unequal workloads, financial disagreements, changing life priorities, or simply growing in different directions can cause even the strongest business partnerships to break down.

When that happens, ending the partnership can feel surprisingly similar to ending a marriage.

The challenge is not simply dissolving the business relationship — it is finding a way to move forward without destroying the personal relationship in the process.

Fortunately, with careful planning, open communication, and proper legal documentation, it is often possible to dissolve a partnership professionally while preserving the friendship.

Here are six practical steps to ending a business partnership the right way.

1. Put Everything in Writing

The most important factor in any partnership breakup is documentation.

Ideally, the partners created a formal Partnership Agreement when the business began. A properly drafted agreement should outline:

• How profits and losses are divided
• Each partner’s rights and responsibilities
• Procedures if a partner wants to withdraw
• Buyout provisions
• Asset division rules
• Steps for dissolving the partnership

Without a written Partnership Agreement in place, disputes often become much more complicated.

If no agreement exists, the partners should create a Partnership Dissolution Agreement that clearly establishes how the business will be wound up and how assets, liabilities, and obligations will be handled moving forward.

In Canada, partnership law is primarily governed by provincial legislation, including:

• Ontario Partnerships Act
• British Columbia Partnership Act
• Saskatchewan Partnership Act
• Quebec Companies and Partnerships Declaration Act

Most provincial statutes provide default rules for dissolution if there is no Partnership Agreement.

Key takeaways: Without a Partnership Agreement:

• Disagreements become much harder to resolve.
• Provincial legislation will dictate how the partnership will be dissolved, which puts it outside of the partners' control.

2. Stay Professional During the Breakup Process

Business relationships can become emotional when money, reputation, and personal investment are involved. Even if tensions are high, avoid turning the dissolution into a personal conflict.

The business world is surprisingly small. Former partners often cross paths again — whether through future ventures, referrals, clients, or professional networks.

Burning bridges can have long-term consequences.

A professional approach includes:

• Communicating respectfully
• Avoiding personal accusations
• Focusing on solving problems instead of assigning blame
• Remaining courteous during negotiations

A partnership dissolution handled professionally can preserve trust even if the business itself no longer works.

Key takeaway: You are ending a business arrangement, not necessarily ending the relationship with your ex-partners.

3. Seek Legal and Financial Advice Early

One of the biggest mistakes business owners make is trying to handle a partnership breakup alone. Dissolving a business partnership often creates legal, tax, and financial consequences that may not be obvious at first.

Professional advisors should typically be involved early, including:

Business Lawyer

A lawyer can help with:

• Drafting a dissolution agreement
• Reviewing existing partnership agreements
• Protecting intellectual property rights
• Resolving ownership disputes
• Ensuring legal compliance during the wind-up process

Accountant or Tax Advisor

An accountant can assist with:

• Final tax filings
• Allocation of income and losses
• Asset valuation
• Debt repayment strategies
• CRA reporting obligations

The Canada Revenue Agency (CRA) Partnership Guidance outlines important tax considerations for partnerships operating in Canada.

Because professional advisors are not emotionally invested in the dispute, they can often help keep negotiations objective and productive.

In difficult situations, consider hiring an independent mediator as well.

4. Be Reasonable When Negotiating the Exit

Partnership breakups often become hostile when one party focuses solely on maximizing their own outcome. This is the point at which negotiations frequently collapse.

Instead, focus on building an exit strategy that is fair to everyone involved.

Questions that need to be addressed include:

• Who keeps the partnership's existing clients?
• How will the business assets be divided?
• How will the outstanding debts be paid?
• Is one partner buying out the other(s)?
• Who retains ownership of the business' intellectual property, websites, trademarks, or customer databases?
• Are there continuing obligations that must be met after dissolution?

Good negotiations require flexibility. If both sides negotiate in good faith, the dissolution process usually moves faster and costs far less in legal fees.

A practical compromise today often saves months of expensive conflict later.

5. Keep Communication Open and Honest

Communication problems are one of the leading causes of partnership breakdowns. Ironically, communication is also the key to resolving the breakup successfully.

You likely entered into partnership because you respected each other’s skills and believed you worked well together. Even if the business relationship is ending, that professional respect still matters.

Maintain regular communication throughout the dissolution process.

This helps prevent:

• Misunderstandings
• Escalating conflict
• Suspicion over finances
• Delays in decision-making
• Expensive legal disputes

Partners who continue communicating openly often reach better solutions and preserve long-term relationships.

Remember: Future opportunities may arise where collaboration with ex-partners becomes possible again. Protecting that possibility has value.

6. Complete the Dissolution Process Quickly

One of the worst outcomes in a partnership breakup is allowing the process to drag on for months. Long disputes often lead to:

• Increased legal fees
• Growing resentment
• Lost productivity
• Employee uncertainty
• Client concerns
• Financial losses

Once both parties agree the partnership should end, move decisively.

Create a clear timeline for:

• Asset division
• Debt repayment
• Contract termination
• Government filings
• Final accounting
• Tax reporting
• Closing business accounts

Most provincial partnership legislation provides procedures to dissolve a partnership through notice, agreement, insolvency, death of a partner, or court order depending on the circumstances.

Key Takeaway: The faster the process concludes, the sooner everyone can focus on moving forward.

Common Reasons Business Partnerships Fail

Understanding why partnerships break down can help avoid future mistakes.

Some of the most common causes include:

• Unequal work contributions
• Financial disagreements
• Poor communication
• Lack of clearly defined roles
• Different long-term business goals
• Personal conflicts affecting business decisions
• One partner losing interest in the business
• Disagreements over expansion or reinvestment

Many of these issues can be reduced significantly with a properly drafted Partnership Agreement right from the outset.

Can You Stay Friends After Ending a Business Partnership?

Yes — but it requires effort. The strongest predictor of preserving the relationship is how professionally the breakup is handled.

If both parties:

• Remain respectful
• Focus on fair solutions
• Seek professional guidance
• Avoid emotional decision-making
• Document everything properly

…it is entirely possible to dissolve the partnership while preserving the friendship.

Analysis: Many entrepreneurs later discover that ending the partnership was the right business decision while maintaining mutual respect personally.

Final Thoughts

Not every business partnership is meant to last forever. Sometimes the smartest decision for everyone involved is to end the relationship and move on.

The goal should not simply be to dissolve the partnership. The goal should be to do it in a way that protects the business interests of both parties while preserving the professional and personal relationships that existed before the breakup.

Handled properly, ending a partnership does not have to become a war. Sometimes, it is simply the next stage of professional growth.

Helpful Resources

• Government of Ontario – Partnerships Act
• British Columbia Laws – Partnership Act
• Saskatchewan Corporate Registry – Partnership Act
• Canada Revenue Agency Partnership Guidance

Have you reached a point with your business where it's no longer desirable or feasible to continue operations? So many businesses, large and small, have faced that decision during the COVID-19 pandemic. It's very difficult to consider walking away from something that you have built with your own equity, sweat, love and passion. But if you have reached that crossroads and there is no hope of selling it and no family members or employees willing to take it over, then your only other course of action may be to shut it down, liquidate the assets, and pay your creditors.

Non-disclosure agreements, confidentiality agreements, business protection agreements, trade secret agreements.

No matter what you call it, a non-disclosure agreement (also called an NDA) an essential part of a company's internal and external contractual structure.

There is no good reason for your business not to use an NDA, and a number of good reasons why you should have at least one NDA template in your corporate toolbox. Many companies have several Non-Disclosure Agreements – one for employees, one for outside contractors, one for suppliers, etc.

Let's discuss the four most important reasons your business needs an NDA.

Reason #1: A Non-Disclosure Agreement protects your customer information.

You are legally responsible for securing your customers' personal information to ensure that it's not stolen or disclosed, whether accidentally or intentionally. Most countries have adopted privacy laws to protect consumers against fraud, identity theft, and invasion of privacy. A business that fails to comply with those laws can suffer serious consequences.

All employees, managers, and contractors who have access to your customer records should be required to sign a Confidentiality Agreement prohibiting any disclosure of any such information to anyone, including family members. You can choose to incorporate the confidentiality provisions into your standard employment contract, or use a separate agreement or confidentiality pledge form.

Your company should also adopt a confidentiality policy that clearly states what the employee's / contractor's obligations are and what their liability will be if they breach the confidentiality provisions. The policy statement should also be distributed to any third party consultants that the company has contracted with, who may receive or have access to confidential information in the course of performing their services.

Reason #2: A Non-Disclosure Agreement keeps your financial data safe.

A competitor could use your financial data to their advantage. So could an ex-employee. A 2014 white paper by Osterman Research revealed that "68% of information workers store work-related information in a personally managed file-sharing solution". And "89% of employees continue to have access to at least one application from their former employer now that they are working for someone else."

A 2021 article by SmallBizGenius.net quotes some alarming employee theft statistics. According to the American Bar Association, "59% of ex-employees admitted to stealing the company's sensitive information when leaving previous jobs".

While requiring your employees and contractors to sign a Non-Disclosure Agreement may not completely protect you from employee theft or fraud, it creates a contractual obligation on their part to protect and not disclose your confidential information, which will continue beyond the term of their employment with you.

Reason #3: A Non-Disclosure Agreement helps your business maintain its competitive edge.

If you have a patented process, a unique business model, a "secret formula", or a software application you've developed specifically for your business, this is a valuable trade secret that your competitors would like to get their hands on.

Trade secrets and intellectual property are some of your company's most valuable assets. If you used outside consultants (programmers, researchers, and the like) to assist in developing those trade secrets, every one of them should be bound by confidentiality agreements. Likewise everyone inside your organization who is privy to these assets should also sign an NDA.

Reason #4: A Non-Disclosure Agreement helps to preserve the value of your business.

If you're planning to sell your business, potential buyers will want all the information about your operations so they can do their due diligence. If you don't require these potential buyers to sign a confidentiality agreement before turning over that information, you run the risk of having your data stolen by someone who may just become your next competitor - with your trade secrets in their hands.

Image by Gerd Altmann from Pixabay

Q. What is a partnership?

A. A partnership is an unincorporated business that is owned and operated jointly by two or more parties. It is typically an ongoing long-term business operation, the end goal of which is to create profit for the partners.

Q. What is the difference between a partnership and an incorporated entity, such as a corporation or limited liability company?

A. The biggest difference is that a corporation has a legal existence separate from its owners, with the same legal rights and obligations as a natural person. A corporation can hold property and assets in its own name, it can sue and be sued, and it must file its own income tax returns. A partnership does not have this type of separate and distinct existence.

Unlike a corporation, a partnership is not required by law to hold meetings, elect officers, or maintain a corporate minute book. Usually the partners will all participate in the management of the partnership and will share pro rata (according to their individual contributions) in the profits and losses, and assume equal responsibility for the partnership's liabilities.

Shareholders of corporations and LLCs are not personally liable for the obligations of the corporation / company. By contrast, partners in a general partnership are all personally liable for its obligations and can be sued by the partnership's creditors.

Q. What are the legal requirements for creating a partnership?

A. If you go into business together with someone else, you have automatically formed a partnership and are not required to file anything to "create" the partnership in the eyes of the law. That having been said, depending on where the business is located and what type of partnership you are forming (such as a limited partnership), there may be some forms that are required by local government authorities for business and/or tax purposes.

Do your research to find out if you are required to submit any documentation to satisfy those requirements in your state, province or territory. It is beneficial for all parties that the details of how the partnership will be run are clearly set out in a written partnership agreement.

If you don't have a written agreement, the partnership laws of your state, province or territory will govern the partnership. A written partnership agreement will remove any ambiguity as to the parties' rights and their responsibilities to each other and to the partnership, and can eliminate many sources of conflict before they arise.

Q. How can a partner leave the partnership?

A. Having a formal written agreement in place will allow you to set out the exit process for partners. The partners must decide what will happen to the partnership if somebody wants to leave the partnership for any reason - whether by choice (retirement, change of circumstances, etc) or by necessity (illness, incapacity, bankruptcy, death). Every Partnership Agreement should contain buy-sell provisions to deal with these situations, in order to avoid loss of income, litigation, tax implications, and other negative consequences.

Q. How is partnership income taxed?

A. As discussed above, a partnership is not considered a separate entity in the way that a corporation is, so the partnership does not pay income taxes on its own behalf. Partnership profits and losses pass through to the partners, who must claim them on their own income tax returns. The partners then pay taxes on their share of profits or deduct their share of partnership losses, as appropriate. Nevertheless, partnerships are required to file certain forms with the taxing authority - this is true in both the United States and Canada.

Q. What is the difference between a general partnership and a limited partnership?

A. A general partnership is a partnership in which all the partners participate in managing the business. In a limited partnership, one or more general partners are responsible for running the business while the limited partners (of whom there may be many) are responsible for capitalizing the business. The limited partners have very little control over the day-to-day operations, but in return for giving up that control their liability for partnership debts and obligations is limited to the extent of their investment.

Securities laws may apply to the sale or transfer of limited partnership interests. If you're considering setting up a limited partnership to attract investment capital, you should consult a lawyer.

Q. What is the liability of the partners in a general partnership?

A. Because a partnership has no legal status as a separate entity, the partners are personally liable for all of the partnership debts and obligations. Partners in a general partnership have the same degree of liability as the owner of a sole proprietorship. If one of the partners creates an obligation for the partnership, all of the partners are bound by it.

Limiting the liability exposure of the partners can be encompassed in a written agreement, by stipulating that all or a majority of the partners must consent to enter into certain types of obligations or to incur debts over a certain limit on behalf of the partnership.

Limited partnerships reduce the liability of the limited partners to the extent of their original investment. The general partner manages the partnership and accepts full liability for the partnership obligations, and the limited partners give up any management authority in return for the protection from liability.

Q. What provisions should a Partnership Agreement include?

A. A written Partnership Agreement should contain the following:

• The identity of each partner.
• The name of the partnership and the type of business it will operate.
• The amount / extent of each partner's investment.
• A procedure for allocating profits and losses.
• The duties of each partner with respect to the partnership business.
• The partners' privileges for drawing on the partnership accounts (if applicable).
• Restrictions on an individual partner's ability to act on behalf of the partnership (and therefore the other partners).
• What types of events will dissolve the partnership (death or incapacity of a partner, for example).
• Procedure for terminating the partnership (for example, either partner may terminate the agreement and dissolve the partnership upon written notice to the other partner).
• Procedure for removing a partner.
• Procedure for dealing with the partnership interest of a deceased or departing partner.
• Mechanism for dispute resolution.

Image by Gerd Altmann from Pixabay

Before deciding whether or not to incorporate your company under the Canada Business Corporations Act or any of its provincial counterparts, there are a number of important considerations which must be taken into account.

A list of the 5 principal steps you need to take in order to set up a limited liability company in the United States.

Every business partnership, no matter how good the relationship, has the potential to end in dispute. So long as the parties agree on significant matters, minor disagreements generally resolve themselves. The best and most proactive way to attempt to resolve or avoid potential conflicts and to minimize the costs involved in conflict resolution is to have a Shareholder Agreement in place to deal with significant business issues before they arise.