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Reference Guide

Introduction to Business Law - Reference Guides

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Department
BLAW - Business Law
Course Code
BLAW 464
Professor
All

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2Introduction to Business Law 3Introduction to Business Law
BUSINESS STRUCTURES
COMMON BUSINESS STRUCTURES
Sole Proprietorship
• Structures whereby there is no separation between
the business and the owner-manager.
All the responsibilities and liabilities of the business
are the owner-manager’s
personally.
Sole proprietorships are taxed
at the same tax rates as
employed individuals. Tax
planning opportunities are
generally no different than for
employed individuals.
• Sole proprietorships are
generally cost-effective and
simple structures to operate and
can be created and wound-up
relatively easily. However, given
that there is no separation between the business
and the owner-manager, all of the liabilities of the
business are the owner-manager’s as well. This is
problematic if the business operates in a high
liability industry.
Partnerships
• Structured whereby two or more people or
corporations carry on business with a common view
to a profit.
• Partnerships are either:
mGeneral partnerships: All partners have the
same liability and authority to operate the
partnership.
mLimited partnerships: The limited partner(s)’s
liability is limited to the amount invested.
• The profits and liabilities of the partnership “flow
through” to the partners. Accordingly, if the
partners are individuals, the partners are taxed at
the same tax rates as employed individuals. This
may be a disadvantage if the
partnership is profitable and the
tax liability is correspondingly
high given the corporate tax rate
is generally lower than the
individual tax rate.
• Partnerships are relatively straight-
forward structures to operate and
can be created and wound-up
relatively easily.
Corporations
A corporation is a separate legal entity from its
owners (called shareholders), executives (called
officers) and the supervisors and controlling mind
(called directors).
An individual can be a shareholder, officer
and director at the same time.
Subject to some exceptions, the corporation
has the same ability to conduct business as
if it was a “natural person.”
• The corporation, and not the
shareholders, signs contracts, hires
employees and may be subject to lawsuits.
• The shareholders do not own the assets
and are not responsible for the liabilities
of the corporation. Thus, one of the
primary benefits to incorporating is
liability protection for the shareholders.
Directors are, however, subject to
personal liability for unpaid government
remittances such as goods and services
tax.
• The second primary advantage of a corporation is
that it is taxed at a lower tax rate than sole
proprietorships and partnerships, assuming that a
majority of the shareholders are Canadian residents.
• Corporations may be incorporated either
provincially or federally. The choice of
incorporating jurisdiction will depend on a
wide variety of factors such as
industry, tax rates and
residence of the
directors.
CONTRACTS: A GENERAL OVERVIEW
A contract is a legally enforceable promise
between two or more persons.
In Canada, contracts are enforceable if:
mThere is the existence of “considera-
tion”- consideration is a benefit that
person will receive; in another words,
it is not a gift
mA contract must be made between
parties who are sound of mind, over
18 and not bankrupt
mMust be for a legal act.
• A verbal contract is enforceable as
long as the above factors are present.
However, verbal contracts are difficult
to enforce given the lack of evidence
as to the true intention of the parties.
Contracts are enforceable with the existence of
offer and acceptance. In other words, one person
has to offer to carry out a legally
enforceable promise and the
other must accept. An offer
without acceptance is not a
legally enforceable contract.
• Contracts with individuals are
governed by consumer
protection legislation which
varies from province to
province.
• Certain industries or transactions,
such as e-commerce, health clubs
and travel agencies, may have
industry specific regulations.
INTELLECTUAL PROPERTY PROTECTION
• Intellectual property in Canada is regulated
federally by the Canadian Intellectual Property
Office located in Ottawa.
• This office administers three major
intellectual property rights:
mCopyright: An expression of
an idea which grants to the
creator the right to produce,
reproduce or publish work, in whole or in part,
or in any form. Copyright governs literary, dra-
matic, musical or artistic work, such as books,
brochures, paintings, music, computer pro-
grams and photographs. A copyright may be
registered in Canada but is not a requirement
given that the law grants a copyright upon the
existence of the work.
mTrademark: A mark that is used to distinguish a
ware or service from wares or services of other
legal entities. A trademark can protect a name, a
logo, a slogan, an image, a phrase or a combina-
tion of these elements. A trademark is regis-
tered on a national basis over a particular good
or service.
mPatents: A monopoly granted by the government
to commercialize an invention for a period of 20
years. A patent is granted to an invention which
can be proven to be new and inventive, either as
a completely new invention or improvement to a
pre-existing invention. Patents are granted in
Canada on a first-to-register basis unlike in the
United States which operates on a first-to-invent
basis.
© 2007-2012 Mindsource Technologies Inc. © 2007-2012 Mindsource Technologies Inc.© 2007-2012 Mindsource Technologies Inc.
Business law, sometimes referred to as corporate-commercial law, is a system of
governance and regulations in connection with the creation, existence and
dissolution of businesses.
Today, Canadian businesses are governed by a combination of written laws,
regulations and policies, and common law (law created by the courts).
This Permachart covers some of the topics of interest to entrepreneurs and
small business owners.
The Province of Quebec is governed by a civil law regime with different
processes and substance that is different than the information set out herein.
www.permacharts.com
BUSINESS LAW
INTRODUCTION TO
BUSINESS LAW
INTRODUCTION TO
TAXES AND BUSINESSES
(The following is a non-exhaustive review on the
subject matter. Advice on taxation should be
sought from qualified tax professionals.)
• The Income Tax Act (Canada) (“ITA”) is the
governing tax law of the federal government of
Canada. Each province and territory also has its
own set of tax laws.
• Under the ITA, the Canada Revenue Agency, the
federal government’s tax administration agency
collection arm, collects tax on the world-wide
taxable income of every person or corporation
that was a resident Canadian during the year.
Non-resident Canadians are taxed only on the
portion of their income which was earned in Canada.
• For businesses, tax is paid based upon the “profit”
of the business in a particular tax year. “Profit” is
generally considered any monies earned minus
permissible business deductions. A deduction can
only be claimed to the extent it was spent for the
purpose of earning business income and the
deduction was reasonable in the circumstances.
(For example, the cost of photocopying was not
above market prices.) If the deduction is
permissible, the ITA allows 100% of some items to
be deducted and other items (such as meals and
entertainment expenses) to be deducted at less
than 100% of the expense amount.
LEVELS OF GOVERNMENT
The Constitution Act, 1867 empowers each level of
government with different responsibilities over
business:
(i) Municipal government: Regulates and
administers the licensing of businesses such
as building permits, qualification for certain
trades-people and zoning issues
(ii) Provincial government: Regulates and
administers, among other powers, the
incorporation of businesses, associated services
related to incorporation, employer–employee
matters and workplace and safety matters
(iii) Federal government: Regulates and
administers, among other powers,
intellectual property rights (copyright,
trademark and patents), import/ export and
international trade, unemployment insurance
and bankruptcies
• Each level of government passes laws
(municipalities pass by-laws) that affect
businesses directly
ADMINISTRATIVE TRIBUNALS
• The Federal and Provincial levels of
government are empowered to create
administrative tribunals with respect to
subject-matters within their
jurisdiction. Administrative tribunals
are quasi-judicial bodies or administrative agencies
with powers granted by government over
particular subject areas.
• Some administrative tribunals affecting businesses
include:
mWorkplace Health and Insurance boards
mHuman Rights
mLabour Relations Board (for unionized workplaces)
mLiquor Control Board
• The decisions of administrative tribunals are
subject to judicial oversight and review in certain
circumstances, such as an error made in
interpreting the law. However, one of the primary
purposes of the tribunal is to exercise jurisdiction
over particular specialized subject areas on behalf
of the government.
COMMON LAW
• Common law, in simple terms, is judge-made law.
The Canadian judiciary is independent of the
other branches of government. As such, all laws,
regulations, and tribunal decisions are subject to
oversight by the Canadian court system.
• In the field of business regulation, the
Courts adjudicate on commercial
disputes “…in either special
“Commercial List” courts or in front of
judges with experience hearing business
actions or interpreting laws which
directly impact on businesses.
WHO GOVERNS BUSINESSES?
TM
permacharts
2Introduction to Business Law 3Introduction to Business Law
BUSINESS STRUCTURES
COMMON BUSINESS STRUCTURES
Sole Proprietorship
• Structures whereby there is no separation between
the business and the owner-manager.
All the responsibilities and liabilities of the business
are the owner-manager’s
personally.
Sole proprietorships are taxed
at the same tax rates as
employed individuals. Tax
planning opportunities are
generally no different than for
employed individuals.
• Sole proprietorships are
generally cost-effective and
simple structures to operate and
can be created and wound-up
relatively easily. However, given
that there is no separation between the business
and the owner-manager, all of the liabilities of the
business are the owner-manager’s as well. This is
problematic if the business operates in a high
liability industry.
Partnerships
• Structured whereby two or more people or
corporations carry on business with a common view
to a profit.
• Partnerships are either:
mGeneral partnerships: All partners have the
same liability and authority to operate the
partnership.
mLimited partnerships: The limited partner(s)’s
liability is limited to the amount invested.
• The profits and liabilities of the partnership “flow
through” to the partners. Accordingly, if the
partners are individuals, the partners are taxed at
the same tax rates as employed individuals. This
may be a disadvantage if the
partnership is profitable and the
tax liability is correspondingly
high given the corporate tax rate
is generally lower than the
individual tax rate.
• Partnerships are relatively straight-
forward structures to operate and
can be created and wound-up
relatively easily.
Corporations
A corporation is a separate legal entity from its
owners (called shareholders), executives (called
officers) and the supervisors and controlling mind
(called directors).
An individual can be a shareholder, officer
and director at the same time.
Subject to some exceptions, the corporation
has the same ability to conduct business as
if it was a “natural person.”
• The corporation, and not the
shareholders, signs contracts, hires
employees and may be subject to lawsuits.
• The shareholders do not own the assets
and are not responsible for the liabilities
of the corporation. Thus, one of the
primary benefits to incorporating is
liability protection for the shareholders.
Directors are, however, subject to
personal liability for unpaid government
remittances such as goods and services
tax.
• The second primary advantage of a corporation is
that it is taxed at a lower tax rate than sole
proprietorships and partnerships, assuming that a
majority of the shareholders are Canadian residents.
• Corporations may be incorporated either
provincially or federally. The choice of
incorporating jurisdiction will depend on a
wide variety of factors such as
industry, tax rates and
residence of the
directors.
CONTRACTS: A GENERAL OVERVIEW
A contract is a legally enforceable promise
between two or more persons.
In Canada, contracts are enforceable if:
mThere is the existence of “considera-
tion”- consideration is a benefit that
person will receive; in another words,
it is not a gift
mA contract must be made between
parties who are sound of mind, over
18 and not bankrupt
mMust be for a legal act.
• A verbal contract is enforceable as
long as the above factors are present.
However, verbal contracts are difficult
to enforce given the lack of evidence
as to the true intention of the parties.
Contracts are enforceable with the existence of
offer and acceptance. In other words, one person
has to offer to carry out a legally
enforceable promise and the
other must accept. An offer
without acceptance is not a
legally enforceable contract.
• Contracts with individuals are
governed by consumer
protection legislation which
varies from province to
province.
• Certain industries or transactions,
such as e-commerce, health clubs
and travel agencies, may have
industry specific regulations.
INTELLECTUAL PROPERTY PROTECTION
• Intellectual property in Canada is regulated
federally by the Canadian Intellectual Property
Office located in Ottawa.
• This office administers three major
intellectual property rights:
mCopyright: An expression of
an idea which grants to the
creator the right to produce,
reproduce or publish work, in whole or in part,
or in any form. Copyright governs literary, dra-
matic, musical or artistic work, such as books,
brochures, paintings, music, computer pro-
grams and photographs. A copyright may be
registered in Canada but is not a requirement
given that the law grants a copyright upon the
existence of the work.
mTrademark: A mark that is used to distinguish a
ware or service from wares or services of other
legal entities. A trademark can protect a name, a
logo, a slogan, an image, a phrase or a combina-
tion of these elements. A trademark is regis-
tered on a national basis over a particular good
or service.
mPatents: A monopoly granted by the government
to commercialize an invention for a period of 20
years. A patent is granted to an invention which
can be proven to be new and inventive, either as
a completely new invention or improvement to a
pre-existing invention. Patents are granted in
Canada on a first-to-register basis unlike in the
United States which operates on a first-to-invent
basis.
© 2007-2012 Mindsource Technologies Inc. © 2007-2012 Mindsource Technologies Inc.© 2007-2012 Mindsource Technologies Inc.
Business law, sometimes referred to as corporate-commercial law, is a system of
governance and regulations in connection with the creation, existence and
dissolution of businesses.
Today, Canadian businesses are governed by a combination of written laws,
regulations and policies, and common law (law created by the courts).
This Permachart covers some of the topics of interest to entrepreneurs and
small business owners.
The Province of Quebec is governed by a civil law regime with different
processes and substance that is different than the information set out herein.
www.permacharts.com
BUSINESS LAW
INTRODUCTION TO
BUSINESS LAW
INTRODUCTION TO
TAXES AND BUSINESSES
(The following is a non-exhaustive review on the
subject matter. Advice on taxation should be
sought from qualified tax professionals.)
• The Income Tax Act (Canada) (“ITA”) is the
governing tax law of the federal government of
Canada. Each province and territory also has its
own set of tax laws.
• Under the ITA, the Canada Revenue Agency, the
federal government’s tax administration agency
collection arm, collects tax on the world-wide
taxable income of every person or corporation
that was a resident Canadian during the year.
Non-resident Canadians are taxed only on the
portion of their income which was earned in Canada.
• For businesses, tax is paid based upon the “profit”
of the business in a particular tax year. “Profit” is
generally considered any monies earned minus
permissible business deductions. A deduction can
only be claimed to the extent it was spent for the
purpose of earning business income and the
deduction was reasonable in the circumstances.
(For example, the cost of photocopying was not
above market prices.) If the deduction is
permissible, the ITA allows 100% of some items to
be deducted and other items (such as meals and
entertainment expenses) to be deducted at less
than 100% of the expense amount.
LEVELS OF GOVERNMENT
The Constitution Act, 1867 empowers each level of
government with different responsibilities over
business:
(i) Municipal government: Regulates and
administers the licensing of businesses such
as building permits, qualification for certain
trades-people and zoning issues
(ii) Provincial government: Regulates and
administers, among other powers, the
incorporation of businesses, associated services
related to incorporation, employer–employee
matters and workplace and safety matters
(iii) Federal government: Regulates and
administers, among other powers,
intellectual property rights (copyright,
trademark and patents), import/ export and
international trade, unemployment insurance
and bankruptcies
• Each level of government passes laws
(municipalities pass by-laws) that affect
businesses directly
ADMINISTRATIVE TRIBUNALS
• The Federal and Provincial levels of
government are empowered to create
administrative tribunals with respect to
subject-matters within their
jurisdiction. Administrative tribunals
are quasi-judicial bodies or administrative agencies
with powers granted by government over
particular subject areas.
• Some administrative tribunals affecting businesses
include:
mWorkplace Health and Insurance boards
mHuman Rights
mLabour Relations Board (for unionized workplaces)
mLiquor Control Board
• The decisions of administrative tribunals are
subject to judicial oversight and review in certain
circumstances, such as an error made in
interpreting the law. However, one of the primary
purposes of the tribunal is to exercise jurisdiction
over particular specialized subject areas on behalf
of the government.
COMMON LAW
• Common law, in simple terms, is judge-made law.
The Canadian judiciary is independent of the
other branches of government. As such, all laws,
regulations, and tribunal decisions are subject to
oversight by the Canadian court system.
• In the field of business regulation, the
Courts adjudicate on commercial
disputes “…in either special
“Commercial List” courts or in front of
judges with experience hearing business
actions or interpreting laws which
directly impact on businesses.
WHO GOVERNS BUSINESSES?
TM
permacharts

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Business law, sometimes referred to as corporate-commercial law, is a system of governance and regulations in connection with the creation, existence and dissolution of businesses. Today, Canadian businesses are governed by a combination of written laws, regulations and policies, and common law (law created by the courts). This Permachart covers some of the topics of interest to entrepreneurs and small business owners
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