Tag: board of directors

What’s the difference between an advisory board and a mentor board?

Many Canadian entrepreneurs will turn to others for help – experienced people who either know their industry, or have some insight into a particular aspect of business.

But did you know that there’s a difference between an advisory board and a mentor board? They sound similar, but serve different purposes. Here’s the difference between an advisory board and a mentor board.

What’s an advisory board?

Some members of your team will be members of your advisory board. These people will provide advice and recommendations to management but do not have authority to vote on or enforce any company decisions. Essentially, it’s like having a sounding board that you can turn to for input.

Usually, an advisory board is made up of experienced industry professionals that can offer some insight and expertise into company issues. Make sure that members of your advisory board are able to offer diverse skills and experiences. The members should be good problem-solvers and communicators. And don’t be afraid to ask CEOs or professionals when recruiting. After all, the worst that can happen is that they say no, and you can move on!

For a small business, usually two to five members are sufficient for an advisory board. Quarterly meetings should be held to discuss business issues. At these meetings, the entrepreneur (read: you) will usually treat the board to lunch or perhaps pay an honorarium for their time and contribution. Be sure to prepare your questions ahead of time for the meetings to avoid wasting time. Consider what you really hope to get from this board. Think of the sort of advice or feedback could they give that will help your company be more successful than it would have been without their help.

What’s a mentor board?

Aside from a board of advisors, it may also be beneficial for your company to have a board of mentors you can call on for advice and guidance.

Mentors should have experience with entrepreneurship or with your specific industry. A mentor can be someone for you to turn for answers, opinions and support — something you don’t always have when you are the boss! Mentors will help you learn from their mistakes and expand your social network. Usually, a trusting longterm relationship is built with a business mentor as a role model.

Choose mentors based on their ability to contribute time, valuable opinions, enthusiastic and positive support, and constructive feedback. Look for mentor programs or search through your own network to see if there are any professionals you already know that might be willing to mentor you. And don’t ignore your gut feelings here. You should be able to trust your mentors with guidance about your livelihood — if your personalities clash, it won’t work.

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Starting an incorporated business in Canada

corporations_in_canadaA corporation is considered by law to be a unique entity, separate from its owners. It can be taxed, sued, can own property and can enter into contractual agreements at either the federal or provincial level. Terms that identify a corporation include “Limited”, “Ltd.”, “Incorporated”, “Inc.”, “Corporation”, or “Corp.” One of these  must be included in the name of the company and must appear on all documents and stationery of the company.

Owners of a corporation are its shareholders, who can’t be personally liable for debts or obligations of the corporation and can’t claim any loss the corporation might experience. Shareholders should have a Shareholders’ Agreement in place to protect them and resolve disputes.

A board of directors is elected by the company’s shareholders to oversee major decisions. One of the great things about corporations is that the company doesn’t dissolve when ownership changes.

The different types of corporations

There are three possible types of corporations, including private, public and federal. A private corporation can be formed by one or more people, but the majority of its directors must be Canadian residents, including a resident of the province in which the company operates.

A public corporation, however, issues securities to the public through the stock markets. Public corporations must file incorporation documents in addition to a prospectus with the Securities Commission in their province. This type must also send out semi-annual financial statements to their shareholders and employ outside auditors.

Finally, federal corporations must register in each province that they do business and may be incorporated federally under the Canada Corporations Act. You’ll have to file your Articles of Incorporation (including your share structure, directors, and name search) under the Business Corporations Act in order to get a Certificate of Incorporation.

How to form a corporation in Canada

Forming a corporation will take a great deal of paperwork, filing and certification to be done properly. It can take a few weeks to complete, so allow yourself sufficient time to get this process done right.

There are a few ways to complete this process, including online, through hiring a lawyer, or by doing it yourself in person. Prices vary, with hiring a lawyer being the most expensive way of completing this process.

Incorporated companies may also be purchased online for as little as $200. The incorporation process is highly recommended, especially due to the fact that it can be done yourself relatively inexpensively.

As mentioned before, you will have to be registered in each province in which you do business. You will have to check the availability of your chosen business name before becoming incorporated.

There are a number of items to obtain in order to become incorporated. You’ll require a minute book, articles of incorporation, and a certificate of incorporation. The minute book will be a binder with many tabs including all of the required documentation for your corporation. These tabs include the following items:

  • Financial statements: Balance sheets and income statements for the company.
  • Banking resolutions: resolutions are records of all of the major decisions that are made fo the organization. For example, if you wish to obtain a corporate credit card, a resolution must be written up and signed by company directors in order to document this decision.
  • Contracts: All of the contracts that your corporation has in place.
  • Shareholder meetings: information regarding the frequency of meetings including minutes.
  • Directors’ register: Listing of all company directors including contact information.
  • Securities register: Listing of all company shares issued. Blank share certificates will have to be purchased and you will have to decide how many shares of your business will be issued, as well as how much each share will be worth. We suggest getting an accountant or lawyer’s advice on share values and issuance. Make sure that payment is received for each share in order to leave a trail for auditing or in case the company is sold in the future.
  • Annual reports: the company’s annual reports.
  • Directors’ meeting minutes: minutes from director meetings.
  • Bylaws and amendments: this is a very important component of the minute book, which may or may not be included if you choose to buy an online incorporated company. This Unit lays out how the business is run including things like how officers are elected. If these are not included in the process that you’ve chosen to incorporate your company, you will have to hire a lawyer to have these written.
  • Shareholders’ ledger: Details of the share issuances or transfers to and from the shareholder. Also includes contact information for shareholders.
  • Shareholders’ Agreement
  • Articles of Incorporation: You must be registered either provincially or as a corporation in Canada. This information will be files with a regulatory agency and provides information such as the corporations name, the board of directors, the purpose for which the corporation was formed, the number of shares as well as the rights and restrictions pertaining to each class of shares, listing of directors, corporation restrictions, names and addresses of incorporators, signatures and any other provisions.
  • Certificate of Incorporation: issued by the government as confirmation of the incorporation.

Benefits of hiring a lawyer include a full service minute book with printed tabs, certificate of incorporation and share certificates. However, hiring a lawyer may not be affordable for a small business in the start-up stages. If you choose to complete this process yourself, we suggest having your lawyer or accountant review your process in order to be certain that everything has been accounted for.

Keep in mind that every major decision must be recorded and kept in the corporation’s minute book. Although this can be very frustrating for business owners, as the paperwork is doubled with T2 Corporate Tax Return and minute book requirements, the incorporation process helps to limit the liability of the corporation.

Watch for future blog posts to find out what goes into a Shareholders’ Agreement, and the perks and snags of corporations.

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