HOW STATUS AND NON-STATUS PEOPLE CAN START A BUSINESS
Q&A WITH LAWYER Bree Jamieson-Holloway
This story is brought to you in part by Borrum Energy Solutions
By Michelle Moore
Bree is a lawyer in Ontario and the UK. She is based in Ottawa where she works for Momentum Business Law. Because of her experience in business law and specifically Indigenous business law, WaterToday spoke with her about how status and non-status people would go about starting a business on and off reserves.
Water Today - What is the first step for starting a business?
Bree Jamieson-Holloway - The first place to begin for anybody is to create a business plan. Business plans are what's going to help you hit the ground running and give potential investors and also people you are speaking to about your business, an idea of what it is you intend to do or are trying to do. It also gives them an overview of what your team will look like, what your financial forecast is and things like that. So it's a big overview of what you're planning, what you want to achieve and how you're going to achieve it. That's kind of the first place to start.
Water Today - Once you've got the business plan ready, what is the next step?
Bree Jamieson-Holloway - Then you're going to want to look into whether you require any licenses and whether there's any regulations you need to comply with. These are things that you want to determine as soon as possible because they help you to anticipate your costs and timelines. So this is something that you ought to be doing prior to or while you're writing your business plan so that you can incorporate those costs and timelines into your plan to give you a better guide for how long things will take you and also the viability of your business should you go and try and find investors they want to know that your business is viable and that you've thought everything through because they want to know that they're ultimately going to get their money back if they invest in you.
Water Today - What is an example of a license one may need?
Bree Jamieson-Holloway - It could be anything really, it could be Health Canada licenses, it could be government licenses of some sort, it really depends what business you're in and whether there's government regulations that you have to comply with and that would apply whether you're on or off reserve. If a company on reserve wants to set up say, a medical marijuana business on reserve, they still have to comply with the Health Canada regulations and apply for licensing and everything so it really depends on what business you're going into and what regulations exist in that sector.
Water Today - Are we talking provincial or federal governments?
Bree Jamieson-Holloway - It would be provincial and federal, so depending on the business that you want to set up you have to research your industry and look both provincially and federally at what the requirements are for you to comply with; any applicable licenses and regulations for your type of business. If you have a lawyer or business advisor that you're working with that's also something that they may help you with.
Water Today - Where would someone go from there?
Bree Jamieson-Holloway - The next part would be determining what legal structure you want your business to take. So that would mean looking at the different options for how to structure a business and determining what structure would best fit your business and what you're trying to achieve.
We can start with sole proprietorship, so you have a legal obligation to register your business name, your operating, or trade name in any province where you intend to do business as a sole proprietor. For example in Ontario, you can go onto the Service Ontario website and register your business name, it costs between $60 and $80 to register, it's really easy to complete and it basically lets people know who they're dealing with.
Water Today - How does sole proprietorship differ from other structures?
Bree Jamieson-Holloway - With the sole proprietorship you are your business, you're the same legal entity as your business, which means you are responsible for all the debts and obligations of your business and your business income and the taxes that you file become part of your own personal income tax. What that means is because you're personally liable, if for example, you default on your business creditors could potentially come after you and your personal assets because you are the same legal entity as your business.
You could also do a partnership, which works in a similar way as sole proprietorship. Where the partners are the same legal entity as the business so although you share financial resources, business obligations and debts and profits of the business, you're responsible for those obligations. A note on partnerships is that it's very important if you enter into a partnership with somebody that you do so with a well drafted partnership agreement from the outset. If you don't have one you could end up in a great deal of trouble in the future if there was a dispute between you and your partner(s). With any partnership we would recommend that you seek the advice of a lawyer to a assist you in drafting that partnership agreement to make sure that it's properly drafted and that your interests are always protected before entering into that partnership.
Water Today - What about businesses that act as their own legal entities?
Bree Jamieson-Holloway - With incorporation you can choose to incorporate provincially or federally. If you're a professional; so say you're a doctor, lawyer or accountant then you actually have to incorporate provincially as a professional corporation, so there are a few exceptions to that rule to being able to choose. Certain professions have to incorporate provincially but for the most part you do have that option. So if you incorporate provincially you would be allowed to do business under your corporate name in the province that you've incorporated in. Take Ontario for example, if you incorporate in Ontario, your corporate name would have protection in Ontario and you would be able to open an office or store or whatever in the province.
Water Today - How does one know whether they have to incorporate federally or provincially?
Bree Jamieson-Holloway - So it's really a choice, for federal incorporation for example you would be able to operate in any of the provinces or territories across Canada. When you incorporate you are asked to register in a particular province, so for example, you live in Ontario but you're going to incorporate federally because you think that in the future there's potential that you might want to do business in Alberta, you'd be asked during the incorporation process to select a province so you could incorporate federally, but register in Ontario to do business. When you are choosing that province it doesn't limit you to where you can do business, it means that you could choose eventually to do business in another province or territory but you would also have a legal obligation to register your business or trade name in that other province or territory as well.
With any incorporation, it can be quite complicated. You can go online and incorporate yourself whether it's provincial or federal but when you're incorporating, or if you're incorporating with shares and things like that it can be quite complicated and there's a lot of processes and options available to you so to save you time and money in the future to not have you having to go back and do articles of amendments which can be quite costly, we always recommend that you seek professional advice from a lawyer or accountant on how to incorporate properly in the first place. Because if you do it properly in the first place then you are less likely to have to spend money in the future to fix things.
Water Today - How does filing taxes work?
Bree Jamieson-Holloway - For Indigenous people, whether you live on or off reserve you may be eligible for a tax exemption, for some or all of your business expenses. Basically Section 87 of the Indian Act gives a sort of general tax exemption for income earning activities for business on reserves. For example if your business operates entirely on reserve then your business income would be considered connected to a reserve and would then be exempt under Section 87. If your business is carried mostly off reserve then the exemption wouldn't apply, however say your business is done 60% on reserve then part of your income could be exempt. So it's really important to consult the CRA and get guidance on this because you don't want to end up thinking you have to pay tax and not, or equally thinking you don't have to pay tax when part of your income is taxable.
There's a lot of guidance on the CRA website that explains how Section 87 works and you can also give the federal government a call. But you should seek the advice of the CRA or an accountant to understand tax exemption rules under the Indian Act.
Water Today - Does it matter for tax purposes whether your employees are status or not?
Bree Jamieson-Holloway - If your employees are status then they would be exempt. If they're non status you would have to pay their tax contributions and CPP contributions. The employee is the determining factor not the employer.
Water Today - What about sources of funding for Aboriginal business?
Bree Jamieson-Holloway - If the company is deemed an Aboriginal business it means that there is a 51% ownership that is controlled by Aboriginal people. It could be a band as defined under the Indian Act, a sole proprietor, a partnership, a not-for-profit, basically they have to have Aboriginal people owning and controlling 51% to be classified as an Aboriginal business. In addition, you have to be a certified Aboriginal business, you have to be a member of the Canadian Council for Aboriginal business, you have to have proof of Aboriginal heritage of the owners, and proof of the 51% Aboriginal ownership in documents like letters of acknowledgement, and tax registration documents. All of this information is available on the Canadian Council for Aboriginal business website. One of the benefits of being a certified Aboriginal business is you can then tender for Aboriginal procurement contractsthrough the federal and provincial government. For example, say you're applying for a renewable energy, the government may have put out a procurement contract for that and once you're certified you can tender for those contracts.
For finding support and funding people on reserves don't always know what their options are and there are a lot of Aboriginal financial institutions across the country who's main goal is to help first nations, Inuit and Metis people build businesses and be successful, so they help you to access funding and business support services depending on what you're looking for. You can go online and search for your local Aboriginal financial institutions, they seem to be regional. Or you can go to the website for the National Aboriginal Capital Corporations Association and they will also provide you with information on your local Aboriginal financial institutions. There are also a lot of small business enterprise centres that provide mentorship and guidance, they'll help you with your business plan, they'll give you computer and internet access, they hold free seminars and workshops, they'll help with intellectual property, license, permits, all of that. So finding your local small business enterprise centres can be really helpful as well.
In terms of financing specifically, you can find government financing, there may be grants and things you can apply for. One of the available Canadian financing tools is the Aboriginal Business and Entrepreneurship Fund and also Indigenous and Northern Affairs Canada might have some funding available. It's really just about searching for what funding is available for your business but specifically for Aboriginal people there are a lot of economic development funds and community development funds available.