Whether you’re a young entrepreneur or have been in the game for a few years, it’s inevitable to make a few mistakes along the way, and these can sometimes come at a considerable cost to your business.
In this article, we’ll explore five of the most common mistakes we’ve seen recently, and discuss ways to correct them quickly to protect your business and foster its future growth.
MISTAKE 1: You haven't registered your business or your incorporation documents are incomplete
It seems like you’ve started your business on your own, without duly registering your legal status with the appropriate registrar. You may have opened a bank account and started doing business without taking the necessary formalities into account.
What’s wrong with that? Who has been appointed director and officer? Has anyone formally subscribed for shares in the company? Wait, do you have a description of the share capital and what do your shares allow you to do? These questions are essential from the very first day of your business.
In addition, it’s imperative to keep records up to date each year and to document dividend distributions to yourself and your associates. Ignoring these obligations could have legal consequences, particularly with regard to the issue of dividends.
MISTAKE 2: You have staff but no contracts
Congratulations! Your company is growing, and with it, your team. But how do you categorize the people who work with you? Are they your employees or independent service providers? It may be tempting to think of those who spend 35 hours a week on your premises, equipped with your work tools, as contractors. However, this perception can be problematic, especially in the eyes of tax authorities such as Revenu Québec.
Imagine hiring a team member as a service provider rather than as an employee. This distinction has important implications for your business. For example, a service provider is not entitled to paid vacation, you are not obliged to cover some of their expenses, and the level of supervision you exercise over their work may be more limited. An employee, on the other hand, enjoys these benefits and is often subject to stricter supervision. These differences can influence the way you manage labor relations and legal obligations within your company.
This is where contracts come in. Much more than mere formalities, they establish a solid foundation for your business relationship. They clearly define the roles, responsibilities and expectations of each party involved. By specifying the terms and conditions of employment, contracts not only protect your rights and interests, but also establish a legal framework for resolving any disputes that may arise. What’s more, given the legal requirements to abide by which differ between employees and contractors, mandating a lawyer to draft an employment agreement or a service agreement, as the case may be, is good practice to protect your business’s interest and limit its liability.
By correctly distinguishing between employees and contractors, you avoid the risk of disputes and ensure that your company meets its legal obligations.
MISTAKE 3: You work with customers on the basis of verbal agreements
Imagine this situation: you say to a customer, “To start the project, I need an initial payment of 30%.” The customer replies, “I prefer to pay you when I receive the product, by the end of the month.” In this case, who’s right? Without a clear written agreement, it’s difficult to determine the obligations of each party. You could find yourself at an impasse, with everyone defending their own interpretation of the agreement. This example shows the importance of establishing written terms from the outset to avoid any misunderstandings.
It is therefore essential to work with written contracts in all business relationships. Written contracts will ensure :
- Clarity of terms and conditions: Written contracts clearly define the terms of the business relationship, eliminating the ambiguities and misunderstandings of verbal agreements.
- Legal protection: Written contracts offer tangible proof of agreed terms, facilitating the resolution of disputes efficiently and fairly.
- Expectation management: Written contracts help manage expectations by clearly defining the responsibilities of each party.
- Professionalism and credibility: It demonstrates a professional commitment to your customers and reinforces your credibility as a service provider/supplier.
MISTAKE 4: You collect large amounts of customer data online without a customized privacy policy
Given the new legal requirements regarding personal information protection, When you collect data online from your customers, it’s imperative to have a personalized privacy policy in place.
Imagine collecting sensitive information such as credit card numbers, delivery addresses and dates of birth. Without a clear privacy policy, your customers may not know exactly what you do with their data, which can compromise their trust in your company. What’s more, simply collecting data doesn’t give you the right to sell or share it without the appropriate consent. A customized privacy policy not only provides the transparency needed to build trust, but also ensures that you’re compliant with data protection regulations such as the Office of the Privacy Commissioner of Canada. Ultimately, it shows that you respect your customers’ privacy and take the security of their personal information seriously. Don’t underestimate the importance of a personalized privacy policy in building trust and ensuring your customers’ data is protected.
MISTAKE 5: You send e-mail newsletters to people who have never agreed to receive your material.
Sending email newsletters to people who have never explicitly agreed to receive your material can be a serious mistake in your marketing strategy. Even the best of us can sometimes struggle with anti-spam rules. Software is available to collect emails directly from websites, offering a clear opt-in option compliant with “Canada’s Anti-Spam Legislation”.
But what about people who simply provide their email when attending events? How do you handle this appropriately? As some say, “they have to agree to sign up!” It’s true.
Anti-spam rules are strict for a good reason: to protect users’ privacy and avoid clogging inboxes with unsolicited e-mail. Respecting these rules is crucial to maintaining your company’s reputation and avoiding legal problems. If you’re having trouble implementing compliant practices, it may be wise to call in a professional. Ultimately, it’s better to be proactive and respectful of your contacts’ preferences than risk tarnishing your brand image by sending unsolicited emails.
Conclusion
We’ve explored five common mistakes that can have consequences, but fortunately, each can be corrected with the right practices and measures.
Registering your business, ensuring its incorporation documents are complete, establishing clear contracts with your staff and customers, implementing a personalized privacy policy, and complying with anti-spam rules for email marketing are all crucial steps in protecting your business, building trust with your customers and ensuring legal compliance.
By keeping these elements in mind and taking proactive steps to correct them, you can avoid common pitfalls and position your company for long-term success.
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