If you enjoy gardening and spending time outdoors year-round, you might want to think about starting your own landscaping business. The work is very physical and the hours are long - but you are your own boss and you can get your business up and running quickly for a relatively small initial capital outlay.
If you have invested a lot of your personal assets into your business, you may lose them if your business becomes insolvent or bankrupt. Therefore, it is important to take proactive steps to protect your business from creditors before any financial problems arise.
Here are some strategies that you can consider to safeguard your business assets and your investment from creditors.
If you fail to protect your business assets before you (i) borrow money, (ii) incur substantial debt, or (iii) encounter significant financial problems, you may be giving your business creditors a better chance of accessing your assets and challenging any future planning you have done.
If you are a shareholder of the company, your exposure is generally limited to the amount of your investment, including your shareholdings and any shareholder loans you make to the company. However, various situations may arise which impose additional liability upon you.
If you have given a personal guarantee to guarantee the debts and obligations of the business, creditors may be able to sue you and attach your personal assets (by way of garnishment or seizure) to cover the amount guaranteed.
If you are a director or officer of the company, you may also have additional personal liability for such things as unpaid employee salaries, uncollected or unremitted sales or other taxes, unremitted payroll deductions, and/or breach of contract.
Prior to signing a personal guarantee, engaging in a new business opportunity or agreeing to be a director or officer of a company, you should consider the following strategies:
There are similar steps you can also take to protect the profits of your business:
A holding company is a separate legal entity that owns shares in another company, usually the operating company that runs the business. The profits of the business could then be paid on a tax-free basis to the holding company through dividends on the shares. Those profits can be reinvested or loaned back to the business in the form of a shareholder’s loan, which would ensure that cash flow remains unaffected. The business can grant security back to the holding company for repayment of the loan, making the holding company a secured creditor. In addition, the holding company can purchase equipment or land required by the business and then lease it back to the business, at a profit. These assets could then be out of reach from business creditors.
A trust is a legal arrangement that allows a person or an entity (the trustee) to hold and manage assets for the benefit of another person or group of persons (the beneficiaries). Any shares in the holding company could be transferred to the trust, and any funds paid by the holding company to the trust by way of a dividend would belong to the trust for the benefit of the trust beneficiaries. These funds would not be available to creditors even if one or more of the beneficiaries signed personal guarantees, or have other personal obligations.
All creditor proofing strategies require careful consideration of taxation issues so as to avoid income attribution problems or the unexpected triggering of capital or income gains. The above opportunities and strategies represent only a sample of what ought to be considered. Each circumstance will offer its own opportunities and restrictions on planning.You should consult with a professional accountant and a lawyer before implementing any of these strategies to ensure that they are suitable for your situation and comply with the relevant laws and regulations.
Image by Mohamed Hassan from Pixabay.
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.
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:
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:
Most provincial statutes provide default rules for dissolution if there is no Partnership Agreement.
Key takeaways: Without a Partnership Agreement:
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:
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.
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:
A lawyer can help with:
An accountant can assist with:
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.
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:
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.
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:
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.
One of the worst outcomes in a partnership breakup is allowing the process to drag on for months. Long disputes often lead to:
Once both parties agree the partnership should end, move decisively.
Create a clear timeline for:
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.
Understanding why partnerships break down can help avoid future mistakes.
Some of the most common causes include:
Many of these issues can be reduced significantly with a properly drafted Partnership Agreement right from the outset.
Yes — but it requires effort. The strongest predictor of preserving the relationship is how professionally the breakup is handled.
If both parties:
…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.
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.
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.
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.
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.
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.
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.
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
If you operate a small business, you already fill a lot of different roles. Should Accountant / Bookkeeper be one of them? Maybe outsourcing is an option that will work for you. Here are some pros and cons to consider when deciding whether to outsource your accounting functions vs. doing them inhouse.
Artists, artisans, vendors, crafters, home businesses and small manufacturers often find that selling their wares through traditional channels can be too difficult and too expensive. Selling goods on consignment, whether online or through a bricks-and-mortar storefront, can be a workable alternative that costs very little, and gives them an opportunity to obtain exposure for their work in several locations and sell goods through more than one dealer.
