Business and Corporate

There Are Three Types of Business Organizations:

Sole Proprietorship

The business and owner are one in the same — one entity. There is no distinction between the owner and the business. Because there is no separation between the owner and the business, nothing shields the owner’s personal assets (unlimited liability). Often businesses start as sole proprietorships and eventually incorporate. Note that if you intend to operate a business as a trade name (i.e. like “Lecky Law) rather than using your own legal name, you are required to register the name with Corporations PEI.


The business is owned by several people or businesses. Because there is no separation between the partners and the business, nothing shields the partners’ personal assets (unlimited liability). So if legal or debt issues arise, all partners become liable. All partners have a fiduciary duty to act in the best interests of one another. It is important that the partners have trust. There need not be any formal partnership agreement for a partnership to exist. If you are “carrying on a business in common with a view to profit” a partnership likely exists. See below on Partnership Agreements. Note that a partnership is required to register their trade name with Corporations PEI.


 A corporation is a separate entity from its owners (shareholders). This gives the owners limited liability (limited to the amount of their investment). If the company gets into debt or legal trouble, your personal assets are safe as a general rule. One exception would be if the shareholder signed a personal guarantee. There are other rare exceptions, such as the company was used to intentionally committed a tort. Incorporation often provides significant taxation benefits as well. Note that if the company intends to operate a business under a trade name that is different from its corporate legal name (i.e. operate as “Green Apple Bakery” when the corporation is named Greenwalt Inc.) you are required to register the name with Corporations PEI.

Services Designed to Maximize Profitability

Incorporation (PEI or Canada)

Incorporating gives you limited liability and often provides taxation benefits as discussed above.

Shareholder Agreements

Shareholders agreements are important to resolve problems when differences arises between shareholders. They help to resolve issues when they arise. For instance, if one shareholder wishes to leave the company, this is much easier to deal with if a Shareholder agreement was executed which deals with the situation. Often these are set up with buy-sell mechanism(s) such as a shotgun clause where a shareholder sets a price and the other shareholders must either buy his/her shares at that price or sell their shares at that price. They may also have a right of first refusal so that if a shareholder receives an offer to buy his/her shares from a third party, the other shareholders can match the offer. These agreements often also include provisions so that on the death of a shareholder, the remaining shareholders purchase the shares from the estate (usually insurance proceeds are used to fund the purchase). They usually restrict certain behaviors so long as a majority or all shareholders agree, such as issuance of new shares or the issuances of dividends. They often include non-competition provisions and even confidentiality provisions.

Purchase or Sale of a Business (Share or Assets)

In buying a business, it is important to have an agreement in place to help prevent disputes from arising, just like if you were buying a home. Due diligence is vital, such as checking for mortgages and liens on assets, tax liabilities, etc. There are a number of tax liens that can arise and so careful due diligence helps to prevent a headache later. Often from a legal standpoint a buyer would rather buy assets, since the organizations liability (if any) would not attach. But tax implications and benefits are important in deciding whether to buy the shares or assets and so accounting advice is vital.

Business Financing: Mortgages & Liens

Businesses are generally leveraged with mortgages and liens.

Partnership Agreements

Partnership agreements help to resolve issues when they arise. For instance, if one partner wishes to leave the partnership, this is much easier to deal with if a Partnership agreement was executed. Also, a Partnership agreement can be set up to avoid some of the rather harsh consequences of the PEI Partnership Act on the happening of certain events, such as the partnerships automatic dissolution on the death, insolvency, or bankruptcy of one partner.

Corporate Bylaws and Minutes

Each company has a minute book containing decisions made at meetings of the directors and shareholders. Often the meetings do not physically take place. Minutes are needed in a variety of circumstances, such as on incorporation, on financing, on the purchase or sale of shares or assets, on the transfer of shares, on a change of directors, etc.

Amalgamations and Reorganizations

Companies may join together or be reorganized. Often this is for tax benefits.

Registration of a Business/Trade Name

All business operating under a trade name (not their individual legal name or corporate name) must register a trade name.

Extra-Provincial Registration

Non-PEI incorporated companies operating in PEI must hold a license.

Other Services We Offer

  • Debt collection and business litigation
  • Employment agreements: There are a number of instances where a written Employment agreement is wise. For instance, if confidentiality or non-competition is important, provisions for such should be inserted into a written Employment agreement
  • Collection Agency license: Collection agencies and collectors must hold a license
  • Distribution agreements
  • Lease agreements
  • Joint venture agreements
  • And more!

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The Lecky Law Team