Starting a business is exciting. There is a product to build, customers to find, and a vision to chase. The legal side of things is rarely what founders want to spend their time on, and I get it. But the legal foundation you lay in the first few months of your company’s life will shape everything that comes after — from how you bring on co-founders and raise capital, to how you protect your intellectual property and eventually sell the business.
I wrote The Law for Founders specifically to help Canadian founders understand these issues before they become expensive problems. This checklist draws on the most important lessons from the book and distills them into twelve things you should do in the early stages of your startup.
1. Choose Your Business Structure
The first decision is what type of legal entity you will use. For most startups with real growth ambitions, the answer is a corporation. A sole proprietorship or partnership can work for very early experiments, but the moment you are serious about the business — taking on risk, hiring people, raising money — you want the protection of a corporation. In The Law for Founders, I outline the three main reasons: limited liability (your personal assets are shielded from business debts), tax advantages (the combined small business tax rate in Ontario is approximately 12.2%, compared to personal rates that can exceed 53%), and the ability to raise capital by issuing shares. The corporation is not just a formality. It is the single most important legal tool available to you as a founder.
2. Pick Your Jurisdiction
In Canada, you will incorporate either federally (under the Canada Business Corporations Act) or provincially (under your province’s corporate statute — in Ontario, the Ontario Business Corporations Act). Federal incorporation gives you nationwide name protection but requires at least 25% Canadian-resident directors. Ontario incorporation has no director residency requirement, which matters if your founding team includes people outside Canada. The right choice depends on your specific circumstances. For a detailed comparison, read our full breakdown of federal vs provincial incorporation, or explore our dedicated pages on federal incorporation and Ontario incorporation.
3. Incorporate and Set Up Your Minute Book
Once you have chosen your jurisdiction, you need to file articles of incorporation. This creates the legal entity. But filing the articles is only the beginning. You also need to complete the organizational resolutions (enacting by-laws, authorizing share issuances, appointing officers, setting up banking arrangements), set up the minute book, and issue shares to the founders. The minute book is the official record of your corporation, and keeping it current is not optional. Properly updated minute books and a clean record of who owns the shares of the company will save your business untold time and cost — when you open a bank account, when the CRA audits you, when investors do due diligence, and when you sell. Our incorporation services page explains how we handle the full process.
4. Register with the CRA
After incorporating, register with the Canada Revenue Agency to get your Business Number. Depending on your business, you may also need to register for a GST/HST account (required once you expect more than $30,000 in revenue over four consecutive quarters), a payroll account (if you will pay salaries), and a corporate income tax account. This is administrative but essential. You cannot collect and remit sales taxes, run payroll, or file corporate tax returns without these accounts. Get them set up early so you are not scrambling when you make your first hire or your first sale.
5. Get a Shareholder or Founders Agreement
If you have co-founders, this is one of the most important things on the list. In The Law for Founders, I tell the story of the Snapchat co-founder dispute: Evan Spiegel, Bobby Murphy, and Reggie Brown worked together on what became one of the most successful social media platforms in the world, but there was no deal papered, no shares issued, and no certainty on what exactly Brown owned. The dispute ended in a $157.5 million settlement. The lesson is clear: negotiate and set expectations right away, and document the agreement. A shareholder agreement covers what happens if a founder leaves, how decisions are made when founders disagree, how shares can be transferred, vesting schedules, non-competes, and more. Without one, you are building on a foundation of assumptions that will eventually crack. Read more about why this matters in our post on whether you need a shareholder agreement, or visit our founders agreement page.
6. Assign Intellectual Property to the Corporation
This is one of the most commonly overlooked steps, and it is one of the most critical. If you developed your product, software, brand, or any other intellectual property before incorporating, that IP belongs to you personally — not to the corporation. You need to formally assign it to the corporation through a written IP assignment agreement. In The Law for Founders, I emphasize that IP is the cornerstone of a tech startup’s value. If a founder leaves the company and the IP was never assigned, the remaining founders may not own the very thing their business is built on. The same applies to any work done by contractors. If your contractor agreement does not include clear IP assignment clauses, you may not own the code, designs, or content they created for you. Be especially careful with contractors who build white-label products — you may be licensing their platform, not owning the underlying code.
If you want help making sure your IP is properly assigned and protected, book a free consultation and we will review your situation.
7. Draft Employment and Contractor Agreements
The moment you bring on your first hire or engage your first contractor, you need proper agreements in place. For employees, the agreement should cover compensation, benefits, termination provisions, confidentiality, IP assignment, and non-competition or non-solicitation clauses where appropriate. In The Law for Founders, I discuss the Waksdale case, which changed the landscape of employment law in Ontario — outdated or improperly drafted employment agreements can be invalidated entirely, leaving employers exposed to common law damages that can be significantly higher than the statutory minimums.
For contractors, the key issues are IP ownership (make sure the agreement clearly assigns all IP to the corporation), scope of work, payment terms, and the distinction between contractor and employee. Misclassification is a real risk. If the CRA determines that someone you are treating as a contractor is actually an employee, you could face penalties for non-payment of wages and taxes, compensation orders, and orders to change your employment practices. Our startup law practice handles these agreements regularly for founders across Ontario.
8. Set Up Terms of Service and a Privacy Policy
If your startup has a website, app, or any digital product, you need terms of service and a privacy policy. The terms of service govern the relationship between your company and your users — they cover things like acceptable use, limitation of liability, dispute resolution, and forum selection (where disputes will be heard). In The Law for Founders, I discuss the difference between click-wrap agreements (where users actively click “I agree”) and browse-wrap agreements (where users are deemed to agree simply by using the website). Canadian courts have both upheld and struck down terms of use depending on how they were presented to users, so the way you implement your terms matters as much as what they say.
The privacy policy is required by PIPEDA (the Personal Information Protection and Electronic Documents Act) if you collect, use, or disclose personal information in the course of commercial activity. This includes collecting email addresses, using analytics tools, processing payments, or storing customer data. Your privacy policy needs to explain what information you collect, why you collect it, how you use it, who you share it with, and how users can access or correct their information.
9. Protect Your Brand with Trademarks
Your company name, logo, and any distinctive branding elements can be protected through trademark registration. A registered trademark gives you the exclusive right to use that mark across Canada in connection with your goods and services, and it provides a much stronger legal position if someone else tries to use a confusingly similar mark. Trademark registration is separate from incorporation — even if you have a federally incorporated company with nationwide name protection, that does not give you trademark rights. A trademark registration provides a different and more robust form of protection. The process takes time (typically 12 to 18 months from application to registration), so starting early is important if brand protection matters to your business.
10. Understand Your Annual Compliance Obligations
Incorporating is not a one-time event. Your corporation has ongoing obligations that you need to meet every year. These include filing annual returns with the government (federal or provincial, depending on where you incorporated), maintaining current corporate records in your minute book, passing annual resolutions (or holding annual meetings of shareholders), and keeping the register of directors and officers up to date. Falling behind on compliance is a common problem, especially for founders who are focused on building their product. But a backlog of unfiled returns and missing resolutions creates real problems when you try to raise money, bring on new shareholders, or sell the business. Annual compliance is not glamorous, but it is necessary.
11. Get Proper Insurance
Insurance is the safety net that catches the things your legal structure cannot. At a minimum, most startups should consider general liability insurance (covering claims of bodily injury or property damage), professional liability or errors and omissions insurance (covering claims arising from your professional services or advice), and directors and officers insurance (protecting directors and officers from personal liability for decisions made on behalf of the corporation). If you are handling sensitive data, cyber liability insurance is increasingly important. If you have employees, you will need workplace safety insurance coverage. The specific coverage you need depends on your industry, your risk profile, and your stage of growth. Talk to an insurance broker who understands startups.
12. Find a Startup Lawyer
This is not a self-serving add-on to the list — it is genuinely one of the most important things you can do. A good startup lawyer is not someone you call when something goes wrong. A good startup lawyer is someone who helps you set things up correctly from the beginning so that fewer things go wrong in the first place. They understand the unique challenges of early-stage companies. They know how to structure share capital for future fundraising. They know how to draft shareholder agreements that actually protect founders. They know the difference between a well-drafted employment agreement and one that will be thrown out by a court. And they know how to spot issues before they become disputes.
In The Law for Founders, I cover all twelve of these topics in depth, with real case studies and practical advice drawn from over a decade of working with Canadian startups. If this checklist has raised questions about your own business, download a free copy of the book for the full picture. And if you want to talk through your specific situation, our startup law practice works with founders across Canada.
Ready to check these items off your list? Book a free consultation and let’s make sure your startup’s legal foundation is solid.