Things to Consider When Incorporating Your Business: Part I

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Written by: Krystin Kempton, Associate
An incorporated business is a distinct legal entity, separate from its shareholders. Once incorporated, the new entity has the ability to do anything a person of full legal capacity can do, including entering into contracts and owning property. If you have decided to incorporate your business in British Columbia, there are a number of things to consider, including what to name your company.  
If you wish for the company to be incorporated with a specific name, it has to be approved by BC Registries and Online Services. Once approved, BC Registry will not allow another company to incorporate with a name that is too similar to your company, therefore allowing your company to reserve the goodwill associated with that name.
The Business Corporations Regulation under the Business Corporations Act (British Columbia) sets out the required elements of a company name. The name must contain a distinctive component, a descriptive component and a corporate designation. Example: ABC Manufacturing Inc. (ABC = Distinctive; Manufacturing = Descriptive, and Inc. = Designation)
(1)    Distinctive element: This element differentiates you from other companies.
(2)    Descriptive element: This element describes the nature of the business. It expands the opportunity for name approval if a different company with similar or identical descriptive elements engages in different business activities, and therefore is not likely to be confused with your company for being too similar.
(3)    Designation: A corporate designation is limited to Incorporated, Inc., Limited, Ltd., Corporation or Corp., as well as French versions of each of those designations. This is a personal preference option and doesn’t make a difference to the company which designation is selected.
Up to three name choices can be submitted in order of preference. The BC Registry will review each name to confirm it contains the prescribed elements and the name will be compared to existing company names on the BC Registry. The first (if any) name choice that meets the basic criteria and will not be confused with an existing company will be approved. The BC Registry will then reserve that name for you for 56 days.
Alternatively, a company can be incorporated as a numbered company. The BC Registry will simply assign a sequential number to the company upon registration. The company can then register a trade name and be known to customers as “doing business as” that trade name, although this is not necessary. There is no name security for a registered business name. The company must be identified by its actual name (i.e., the assigned number followed by B.C. Ltd.) for all formal and legal matters, such as writing cheques and entering into contracts, but the company may use its trade name for signs, business cards and letterhead, for example.
There are a number of other considerations when incorporating, including (among other things) whether to use standard articles or revise them to suit the needs of your company, determining share structure and shareholders, electing directors, appointing officers and selecting who shall have signing authority for the company. Once incorporated, the company will have ongoing reporting requirements under the Business Corporations Act. We recommend seeking legal advice to discuss these items and to ensure the incorporation is completed properly.

Complicated Hit and Run Scenario Resolves Prior to Trial for $450,000.00

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Michael Yawney QC was retained by a construction contractor from Salmon Arm BC who was involved in a bizarre accident on Hwy #1 where a transport truck side swiped his vehicle and then took off.  
The client suffered a fracture to his orbital bone near his eye and vision and  imbalance issues. The transport truck could not be identified and so the claim involved a hit and run scenario with limited insurance coverage available. Further, the client had to rely on his own underinsured insurance coverage, a process that required arbitration after a trial determined damages that exceeded the initial limited coverage under hit and run provisions. Mr. Yawney was able to negotiate a resolution of the client’s claim for $450,000.00 prior to trial.

Motorcyclist from AB Resolves Claim Against BC Driver for $750,000.00

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A local motorcycle association referred a man from Alberta to Michael Yawney QC to assist him with his claim for injuries from an accident where a BC driver pulled out in front of him on Hwy 97 without warning.
The man suffered serious orthopedic injuries that required multiple surgeries and an extended stay in hospital. His injuries also affected his capacity to work as a mechanic, reducing the amount of work he could sustain post accident.  Mr. Yawney was able to resolve the claim against the BC driver despite liability being contested and the presence of deduction issues regarding the client’s own insurer. The claim was resolved for $750,000.00 plus costs and disbursements, and the client continues to receive disability benefits from his own insurer as well as coverage for physio and other future care items.

Wife’s Accident Claim Settles Prior to Trial and Includes Husband’s Time

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A retired woman from Sorrento BC retained Mr. Yawney to pursue a claim for injuries suffered when she was hit hard by an Alberta driver as she slowed for children crossing the street after getting off a school bus. The woman suffered soft tissue injuries and exacerbation of prior health issues which resulted in a prolonged recovery process, required extensive rehabilitation and impacted most of her recreational activities. Her husband of many years was required to assist her and take over many of the domestic duties in their home. Her claim was resolved prior to trial for $185,000.00, including a claim for the husband’s time and assistance that was required because of the accident.

Rear End in City Traffic Results in Settlement for Husband and Wife

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A husband and wife from Kelowna retained Michael Yawney QC to represent them after they were rear ended in City traffic, stopped at a light. Both suffered soft tissue injuries that required significant physiotherapy and massage, as well as pain medications. Their claims were settled collectively for over $175,000.00 plus costs and disbursements.

Claim Settles at Mediation for over $700,000.00

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Michael Yawney QC was retained by a young lady from Kelowna who was involved in two separate accidents a few years apart. Her injuries included a mild traumatic brain injury that healed over time, as well as debilitating headaches, neck and back pain, and psychological injury (PTSD). The injuries affected her ability to pursue post secondary education and forced her to change her career plans. Mr. Yawney was able to resolve her claim at mediation for over $700,000.00 plus costs and disbursements.

Understanding Reverse Mortgages

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Written by John Clark, Associate

As house prices have climbed over the last few years and the baby boomers have begun to retire, an increasing number of people have been looking to reverse mortgages as a way to make use of the equity in their home and increase the size of their pocketbook for retirement. Although reverse mortgages may appear quite promising at first blush, they aren’t necessarily for everyone and it is important to fully understand some the finer points before you sign on the dotted line.
These mortgages differ in a couple of important respects from a traditional mortgage. Firstly, they are available only to those aged 55 and older, and if you have a spouse, both you and your spouse have to meet the age requirement.  Secondly, there are no monthly payments of principal or interest required to pay back the mortgage, and finally, the mortgage only comes due when you die, sell your house, or move out permanently.
One of the more appealing features of a reverse mortgage is that the money advanced by the lender is tax-free, and therefore doesn’t affect entitlement to Old Age Security or the Guaranteed Income Supplement payment. However, bear in mind that if you decide to sell your house or you pass away, the loan plus the interest, will have to be repaid. This can mean less money to count on if you have to sell your house to pay for long term care, or, if you pass away, less money left in your estate to leave to your loved ones.
Further, while the benefit of no monthly payments is appealing, the downside of not making payments is that the interest accrued is added to the balance of the loan, meaning the mortgage grows over time, leaving you with less equity in your home. It’s also worth noting that the interest rates on reverse mortgages are higher than those on conventional mortgages, making these loans more expensive.
However, this isn’t to say that a reverse mortgage is never the solution. For those who cannot bear the thought of leaving their homes, paying a little more to ensure that they never have to move during their lifetime can be worth the added cost (even if it may be more expensive than the alternative of selling and downsizing). For those who are a little more risk tolerant, they can also be a way to cash in on the appreciation of their home’s value without having to go through the hassle of selling, allowing an individual to take advantage of their home’s equity at the peak of the market, and hedge against a drop in real estate values.

Like all types of loans, it pays to understand the fine print. Before making any decisions, a chat with your lawyer and your financial advisor about the options available in your specific situation will be time well spent.    

Complicated Roll Over Accident Settles for $200,000.00

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A young man from Prince George BC retained Michael Yawney QC to pursue a claim for injuries suffered in a roll over accident on the Yellowhead Hwy. The client was asleep at the time of the accident and there were issues in terms of who was actually driving the vehicle at the time of the roll over. The young man suffered soft tissue, head and shoulder injuries in the accident. Unfortunately, he also suffered subsequent work injuries and injuries from a further motor vehicle accident that complicated the assessment of his injuries and damages. Fortunately, the client was able to return to work and substantially recover from his injuries. His claim was settled prior to trial for $200,000.00 plus costs and disbursements.

Head On Accident Settled During Trial for $500,000.00

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Michael Yawney QC and Ryan Irving pursued a claim through to a jury trial in Kamloops BC for a Shuswap resident who had been hit head on by an inattentive driver while he was driving on a side road close to his home. The client was a tradesman and although he carried on working after the accident, the effects of injuries suffered in the accident impacted how much he could work and his ability to maintain his hobby farm. Past and future income loss, as well future care and out of pocket expenses due to the accident were in issue. The matter settled during the trial for over $500,000.00 plus costs and disbursements. 

Successful Business Plans Include Marriage Agreements

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Written by Tracy Knight, Associate

Yes, it’s true.  Business professionals, developers, and entrepreneurs are used to taking calculated risks in order to grow the company.  It is one of the foundations of success.  But if a business could crumble as a result of a business partner’s shaky marriage, everyone will agree there is a risk that business owners need to mitigate.
Consider your business.  You may have built up the company, family farm, real estate portfolio, or other entrepreneurial venture by investing long, hard hours, learning from your parents, joining forces with your friend or siblings, and hoping to pass on your now successful venture to your children.  Rather than looking at yourself, consider your business partners and their spouses (maybe your in-laws, maybe your siblings, maybe your best friend).  You own a growing enterprise with someone else and you have no control over your partner’s personal relationship with his or her spouse.  While your own marriage may be solid, consider what may happen if there were a relationship breakdown happening to one of your business partners. 
In British Columbia, the Family Law Act says that each spouse is entitled to 50% of family property that exists on the date of separation.  “Spouse” includes people who have lived together in a marriage-like relationship for 2 years.  “Family property” is anything that either of the spouses own.  There are some exceptions to family property such as assets brought into the relationship, in which case the growth in value of those assets is family property, still to be divided. 
Translated into the business scenario, you could be in a situation where a spouse is entitled to 50% of the value of one partner’s portion of the business.  Can your business partner afford to make that payout in cash?  Likely not.  Can your business handle buying out one of the partners so that a payout can be made?  Maybe.  But your partner will no longer be a partner in the business – what if that partner’s contribution is crucial to your business success?  What if your business branding is connected to the business partners? What if a buyout must be made at a time when other unexpected expenses arise? What if…?
A marriage agreement is not about unfairness to a departing spouse.  Instead, it is a pre-determined plan to mitigate risk – it should set out mechanisms for payouts that are business-centered and fair to the departing spouse. The business plan should consider valuations, privacy, and the circumstances when a partner will be bought out.   Once a family law matter is underway, the business-friendly options to carry out a division of property (and indeed some of the rational thought processes) are diminished.  Judges tend to employ cut and dry divisions of property and only after the financial affairs of the business have been aired before the court.  Parties can reach alternative agreements, but there is little incentive for a departing spouse to help the business survive.  The reality is that self-interests tend to take over. 
Successful business plans include marriage agreements.  Seek advice from a legal team that approaches your business strategy with input from all areas of law.

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