Wednesday, November 17, 2010

Incorporation Mysticism

I thought of calling this blog entry "Incorporation Blues", but it isn't really a downer - on the contrary, it's incredibly exciting! But it is rather mysterious...

I have actually been through the incorporation process three times before, so it should be no great mystery. I was a shareholder in a company a couple of my friends created way back in the 80's - I sold my shares back to my friends when I realized I couldn't participate as fully as I had originally expected, and eventually one of them took over the whole company and that was that.

Then, for four years, I was Associate Director and later Director for a large pan-Canadian research network with an incorporated Business Centre. That was the second time, but it wasn't me who actually drew up the paper work, even though I learned by the seat of my pants how a CEO with no vote on the Board still has to manage the Board and how much power a non-voting member can still have. A very interesting experience, with a budget in excess of 25 million dollars, so not small fry at all!

Finally, I co-owned a small business with my collaborator and business partner of long date, Marie Louise Bourbeau. Here I really learned the nuts and bolts of incorporating, setting up shareholders meetings, a Board of Directors, and so forth. However, our company didn't actually make any money! We incorporated before we knew where we needed to go with the concept (my fault actually, I was the one who jumped the gun!) and we ended up funding most of the things we wanted to get done through my research grants at the university. We did remarkable things at the edge between the sciences and the arts .... but it wasn't really a business. It was also a constant nightmare trying to keep separate my business for the company from my contributions as a researcher, so as to avoid conflict of interest situations. We finally decided to close down the "business" last year since we were still not making any money and had no idea how we were going to!

So this is my fourth venture, albeit the first really commercial one based on my personal initiative. Nonetheless, the other experiences give me background and a certain amount of experience with the mechanics of setting up a business, including developing a business plan (we developed business plans for both the research network and the arts-science initiative), developing Articles of Incorporation, developing a logo and brochure, etc.

My business coach in Toronto tells me that my number one principle for spending money (or doing anything at all), is "lead with revenue" - that is, make sure that there is a direct line between what I'm doing/spending and how this is going to generate revenue! It seems such an obvious thing, somehow, but I find it really useful to review all my expenditures in light of how they relate to income!

So after reviewing all the choices (do I incorporate or merely register as a single-person business? do I incorporate under provincial law or federal law? does the company offer a single type of share or more types of shares? how many shares should I issue, and of what value? how many directors do I need on the Board? etc.), and consulting with some people with good knowledge of what is appropriate, I am moving forward to the next stage. Still, the process still seems mysterious and somewhat heady - one is making a rapid series of decisions that will set in place many of my activities over the next umpteen years!

It turns out that I may need to contact the bank initially before incorporating, as they may have some requirements regarding the Articles of Incorporation. These could always be accommodated later, but I'd have to pay another chunk of money to have an amendment made, so it makes sense to do it all in one go (I think!).

My workshop is ready - I shall be posting some photos of the space shortly. I've been working on a business card, and I am starting to look into creating an initial website. And the sewing still has to happen as well!

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