Written by Ayman Khan
JD Candidate 2025 | UCalgary Law

Startups often begin with an idea birthed by a single entrepreneur or a group. Most companies have more than one founder, and the life cycle of a start-up company shows that these founders pool their skills together to create a viable entrepreneurial venture, buoyed primarily by the hopes, dreams and ambitions of the founders. Thus, start-ups also represent a labour of love from the point of view of the founder, who may resist any changes or challenges to the path visualized for the proverbial brain-child of the founder.
The skillset required for these initial few stages in a start-up’s life is oftentimes different from the skillset required to further grow such an enterprise once it is established. This leads to conflicts, mainly over vision and plans for the start-up. There may also be issues due to the temperament and competency of founders, which did not prove to be a hindrance during the initial stages but have now reared their head after growth. A 2008 Harvard study found that 50% of founders were no longer the CEO after their venture passed the two-year mark[1]. This indicates that most start-ups and nascent enterprises realise the need for professional management fairly quickly into their life-cycle as Founders’ skillsets are critical primarily at foundation of the company.
This leads to several issues as Founders may all be loyal to each other, thus making removal much more difficult. It may also be rendered even more complex by the nature of start-ups as the majority of employees at the onset may also have directly been hired by the founders personally. The aforementioned Harvard study found that 4 out of 5 entrepreneurs in such scenarios are forced to step down from the CEO’s post, with most also being shocked that investors had insisted that they give up control [2]. All of these factors only serve to increase the likelihood of issues with founder ousting. A start-up’s leadership transition from founder to professional management may thus make or break the start-up.
Thus, there is a need to “Founder Proof” companies to prevent such founder conflicts from potentially sinking the company. The first step in founder-proofing a startup is to establish a comprehensive founders' agreement. This document outlines each founder's roles, responsibilities, and equity distribution, along with procedures for handling disputes and exit strategies. Said agreement should also address decision-making authority, conflict resolution mechanisms, and the process for adding or removing founders, in order to prevent conflict. Critically, the agreement should be drafted in a manner that prevents “hold-up risks” or deadlocks, wherein the consent or a particular action is required on part of a founder in order to move forward with a decision. This could also take the form of decision-making procedures wherein the approval or consent of all founders is required. Another potential hold-up risk may arise from onerous exit procedures for founders, it is thus prudent to ensure that founder and officer exits do not contain unnecessary requirements. Therefore, it is advisable to seek legal counsel when drafting this agreement to ensure that it complies with Canadian business laws and best practices. The Business Venture Clinic shall be able to assist with providing an informational memo regarding such.
Another essential element in protecting a startup is implementing strong corporate governance practices. Incorporating the business as a corporation under the Alberta Business Corporations Act [3] creates a legal framework that defines shareholders' rights, board responsibilities, and officer roles. By structuring the company with a well-defined board of directors and adopting robust corporate bylaws, founders can ensure that key decisions are made transparently and with accountability to each individual founder or officer, thus reducing the likelihood of conflict or ambiguity.
Intellectual property (IP) ownership is another critical factor in founder-proofing a startup. Founders must ensure that all IP, including software code, branding, and proprietary processes, is assigned to the company rather than individual contributors. This is particularly important when founders collaborate on innovations before formal incorporation. Founders should use written agreements such as a separate IP assignment agreement and a non-disclosure agreement (NDA)  in the series of agreements that form the individual’s employment agreements, in order to establish clear ownership rights. Registering trademarks, patents, or copyrights further protects the startup's valuable assets. Failure to register IP ownership with the company as opposed to individual founders may lead to negative behaviour as it does not align the incentives of the founders with the company, thus leading to the founder having too much power.
Finally, founder-proofing requires a strong focus on financial controls and transparency. Establishing clear financial reporting processes, budgeting protocols, and expense tracking systems ensures that all founders have visibility into the company's financial health. This may mean, amongst other measures, defining the company’s mandate realistically, not including contradictions when it comes to officer and founder responsibilities (especially those responsibilities that are fiscal management and reporting), and having clear time frames and milestones for debt and financing agreements. Additionally, startups should implement written financial policies that outline expense approvals, investment decisions, and revenue distribution to reduce the risk of financial mismanagement.
By implementing a comprehensive founders' agreement, establishing strong governance practices, protecting intellectual property, and ensuring financial transparency, Canadian entrepreneurs can effectively founder-proof their startups. Taking these proactive steps not only safeguards the business from internal conflicts but also enhances its credibility with investors and stakeholders, thus leading to more positive outcomes. Building a resilient company requires planning and foresight, therefore founder-proofing is a crucial component of ensuring long-term success for any company, particularly start-ups.


[1] Wasserman, Noam. "The Founder's Dilemma," Harvard Business Review (2008) <https://hbr.org/2008/02/the-founders-dilemma>

[2] Ibid

[3] Business Corporations Act, RSA 2000, c B-9,

Written by Mohamed Barre
JD Candidate 2026 | UCalgary Law

That spark of an idea, the vision of your own business – it's exhilarating! But then reality hits: incorporation. Suddenly, you're navigating a maze of provincial vs. federal, ABCA vs. CBCA, and a mountain of forms. Feeling overwhelmed? You're not alone. Choosing the right incorporation path is crucial, and today, we're cutting through the confusion. Let's break down the differences between incorporating federally vs. provincially, focusing specifically on the provincial process here in Alberta, and  get you one step closer to launching your dream.
To start, the processes for incorporating under the ABCA and CBCA are substantially similar. In Alberta, the process of incorporation is set out in Sections 5-14 of the ABCA. The ABCA requires three documents:[1]

1. Articles of Incorporation,
2. Notice of Address, and 
3. Notice of Directors. 

Each document must comply with the ABCA. Once the documents and a Newly Upgraded Automated Name Search (NUANS) report are filed with Service Alberta or an accredited registry agent, the information will be vetted for compliance with the ABCA. A NUANS report is used to establish that there are no other corporations with an identical or similar name as your proposed corporation name. Additionally, if the corporation were to conduct business in another province, the corporation would need to incorporate extra-provincially in said province. 
Prescribed incorporation fees must also be paid before a certificate of incorporation is issued.[2] Furthermore, pursuant to section 20.1(1) of the ABCA, all corporations are required to: 

• Appoint an agent for service who is a resident Albertan 
• Provide the Registrar with a notice of appointment of its agent for service, together with articles of incorporation 
• Ensure that the address for its agent for service is an office that is accessible to the public during 

The process for federal incorporation is similar to the ABCA and is set out in Sections 5-13 of the CBCA. Federal incorporation also requires filing Articles of Incorporation, Notice of Address, and Notice of Directors.[3]  Under the CBCA, at least twenty-five percent of the directors of a corporation must be resident Canadian. However, if the corporation has less than four directors, at least one must be a resident Canadian. Furthermore, the corporation will also be required to incorporate extra-provincially in the provinces where it conducts business.

1. Fees The cost of provincial incorporation is $275.[4] The cost of federal incorporation is $200 for online applications or $250 for paper applications.[5] Both carry additional fees such as a $45 NUANS report, and a registrar service fee or if using a law firm to incorporate then the fees of their services. 
While incorporating a federal corporation is comparatively less costly in terms of incorporation fees, federal corporations are also required to extra-provincially register in the provinces in which they will carry on business. The definition of “carry on business” triggering the registration requirement encompasses running a business, having an address, post box or phone number, or offering products and services for a profit.[6] This is an additional cost consideration for a business seeking to incorporate federally. The fee to register an extra-provincial corporation in Alberta is $275 plus service fees.[7] 

2. Address The ABCA requires a business to have its registered office in Alberta.[8] The requirement to have a registered office in Alberta is not satisfied by merely having a post office box in Alberta.[9] The requirement is a physical address in Alberta accessible during normal business hours.[10] The ABCA requires shareholder meetings to be held in Alberta unless all shareholders entitled to vote at the meeting agree to hold it outside of Alberta, or if the articles so provide.[11]
The CBCA allows a federally incorporated business to have a registered office and hold annual meetings in any province in Canada.[12]  

3. Filing Requirements The CBCA entails additional paperwork by requiring a corporation to file annual returns.[13] Current annual federal filing fees are $12 (online) or $40 (paper filing).[14] The filing requirements must be completed annually, whether or not there have been director or address changes for the corporation. 
The ABCA also has annual return requirements.[15] These requirements also apply to registered extra-provincial corporations.16 A federal corporation registered in Alberta will have to file annual returns under the ABCA to comply with the statute. A corporation operating in Alberta has more onerous filing requirements if it incorporated federally as opposed to provincially. 

4. Name Protection
Federal incorporation allows a business to use its corporate name across Canada.[16] This degree of name protection can only be defeated by a trademark. Federal name searches are therefore more rigorous than provincial name searches. 
Provincial incorporation only allows a business to use its corporate name in Alberta, and a corporation will need to conduct a name search in each additional province in which it wishes to carry on business. There is a risk that its corporate name will be rejected in another province, requiring the use of an alternative name. 

5. Privacy
Corporations Canada maintains a register of the Registered Office Address, Directors, Annual Filings, and Corporate History of federal corporations, publicly available online at no cost.[17]  Provincial corporations have relative privacy with respect to the accessibility of their corporate data, as such information from provincial corporations is not publicly available online, and a fee is required for a search.  


[1] ABCA, ss 6-7, 20, 106.

[2] Service Alberta, “Incorporate an Alberta Corporation” (2023), online: Government of Alberta <https://www.alberta.ca/incorporate-alberta-corporation.aspx>.

[3] CBCA, ss 7, 19, 106.

[4] Open Alberta, “Registry agent product catalogue” (2023), online: Government of Alberta <https://open.alberta.ca/publications/6041328>.

[5] Corporations Canada, “Services, fees and turnaround times – Canada Business Corporations Act” (2020), online: Government of Canada <https://corporationscanada.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06650.html>.

[6] Corporations Canada, “Steps to Incorporating” (2020), online: Government of Canada <https://corporationscanada.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06642.html#toc-06>.

[7] Service Alberta, “Registry agent product catalogue” (2020), online: Government of Alberta <https://open.alberta.ca/publications/6041328>.

[8] ABCA, s 20.

[9] ABCA, s 20(4).

[10] ABCA, s 20(6).

[11] ABCA, s 131.

[12] CBCA, ss 19(1), 132.

[13] CBCA, s 263.

[14] Corporations Canada, “Services, fees and processing times – Canada Business Corporations Act” (2020), online: Government of Canada < https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06650.html >.

[15] ABCA, s 268. 16 ABCA, s 292.

[16] Corporations Canada, “Is incorporation right for you?” (2020), online: Government of Canada <https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06641.html>.

[17] Corporations Canada, “Search for a Federal Corporation” (2020), online: Government of Canada <https://www.ic.gc.ca/app/scr/cc/CorporationsCanada/fdrlCrpSrch.html>.
​

Written by Alec Fader
JD Candidate 2025 l UCalgary Law​

DISCLAIMER: This analysis focusses on statutes in Alberta. There are nuances in various partnership and corporations acts across provinces and federal jurisdictions and, although the principles are generally similar, corporate structures being created in other jurisdictions should be researched separately.
 
There are, generally, three types of business associations in Canada which concern start-ups: (i) sole proprietorships, (ii) partnerships, and (iii) corporations. Each of different type of business association has a variety of pros and cons, and there are important considerations regarding how an entrepreneur should structure their start-up. This article seeks to provide a brief outline of what each of these business associations is, and their advantages and disadvantages.
 
Factors Which May Influence the Type of Business Association
 
There are several factors which may influence a business’ decision to choose a certain structure. Two of the most salient are:

1. Limitation of liability[1] – there are only a couple of business associations which are going to limit the liability of individuals who are participating in the business. If a business intends on commercializing and providing products or services, it may wish to consider a structure which limits personal liability.

 

1. Access to capital[2] – some business organizations have an easier time attractive outside capital. If a business intends on raising money from outside sources and scaling, it may want to consider specific business associations.

 
Sole Proprietorships
A sole proprietorship is a business that is created, run, and controlled by one person. There are no formal requirements for the creation of a sole proprietorship – once an individual engages in business, they have created a sole proprietorship.[3]
 
Advantages

1. A sole proprietorship is a simple business organization – there is no need to register or file any formal documents.[4] However, if a sole proprietorship does which to register a trade name, they must make a filing, and the sole proprietorship must be registered with Revenue Canada if making over $30,000 per year. [5]

 

1. A sole proprietorship allows the proprietor to have absolute control over management – as there is only one individual running the business.

 

1. A sole proprietorship provides “flow-through” tax benefits, meaning that the losses of the business can be “flowed through” into personal income tax. This provides an offset of the losses of the business to the personal income tax (for example, if the proprietor made $100,000 of personal income and the proprietorship lost $30,000, the personal income would effectively be $70,000). However, the same is true of gains – the gains of the sole proprietorship will be reported as personal income.[6]

 

1. It is simple to dissolve – the proprietorship can either be sold or the proprietor can choose to wind down the business.

 
Disadvantages

1. Proprietor has unlimited personal liability for the obligations of the business. As a result, any liability which the business incurs (debts, lawsuit settlements, etc.) will render the proprietor as personally liable.[7]

 

1. Limited avenues to finance the business. There is only one way to finance the business, which is through debt. As noted above, the proprietor will be personally liable for the debt, and therefore financing the business can be a very risky endeavour.[8] Therefore, sole proprietorships are generally confined to smaller operations.[9]

 
Partnerships
There are multiple types of partnerships, including:

1. Partnerships
2. Limited Partnerships (“LP”)
3. Limited Liability Partnerships (“LLP”)

 
For the purposes of this article, I will focus on partnerships, as LLPs are available only for certain types of professions (such as lawyers, doctors, and accountants),[10] and LPs are a more complicated structure generally used for joint venture projects and for specific tax reasons, and there is generally not much utility for start-up companies (as the trade-off to obtain limited liability in the LP is to have no role in the management of the LP).[11]  
 
Partnership
A partnership is a type of business organization where two or more people carry on business together with the intention of making a profit.[12] This happens by operation of law and is a question of fact. There are no filings necessary to create a partnership – if the necessary elements of a partnership are there, a partnership has been created.
 
Advantages

1. Flow through tax benefits (described above). In the case of a partnership, each partner will have the ability to use a certain share of the partnership losses to offset their personal income. If the partnership makes a profit, partners will report a share of those profits on their personal income.   

 

1. Again, a simpler type of arrangement – there are no formal requirements that exist, and the partnership, in the absence of a partnership agreement, will automatically be governed by the Partnership Act. However, to provide greater structure and maximize certainty about the operations of the partnership, it is beneficial to draft a partnership agreement (which could be considered a disadvantage as it adds complexity to the arrangement and there are some elements of a partnership which cannot be changed through a partnership agreement[13]).

 
Disadvantages

1. Unlimited joint and several liability on all the partners for the debts and liabilities of the partnership.[14] In other words, if one partner, in the course of partnership business, takes on debt without the consent of the partners (as partners are all agents of one another and can bind one another) each partner will be jointly (together) and severally (individually) liable for the full extent of the debt or liability.

 

1. Again, financing is difficult to obtain.[15] Giving money to a partnership may present an image than an investor is a partner to the partnership – something which both parties are unlikely to want. Furthermore, it is similar to the sole proprietorship where equity cannot be issued. Therefore, the only financing which is available will be debt financing – again, where each partner will be jointly and severally liable for the debt obligation.

 
Corporations
A corporation is a distinct legal entity which has several of the same rights as a natural person. As a quick run-down, the corporation has shareholders, directors, officers. The shareholders of the corporation are commonly referred to as the “owners” of the corporation – they hold equity in the corporation and are entitled to the residuary (what is left over after all other outstanding obligations are paid out in the event of liquidation of the corporation). Shareholders become shareholders by providing capital to the corporation in exchange for equity. Directors are the individuals who run the corporation. The directors, under corporations’ law, have all power to manage and direct the corporation, however, this power must be exercised in a “quorum” as a board.[16] Therefore, it would be inefficient to manage the day-to-day operations as a board, and day-to-day management powers are delegated to the officers, who are the C-Suite of the corporation (CEO, CFO, etc.).[17] It is important to note that there are some functions which cannot be delegated to management,[18] and some functions of the corporation which must be approved by shareholders.[19]
 
Advantages

1. The corporation creates limited liability[20] - As stated, the corporation is a separate legal entity. As a result, it can sue and be sued. Therefore, shareholders and directors will have limited liability.

 

1. Ease of financing[21] - As noted, the corporation can issue equity in exchange for capital. Effectively, a shareholder can give capital to the corporation in exchange for equity, and they become an equity holder of the corporation. This equity can grow and become more expensive, providing incentives for investors to choose this type of investment. For example, an investor can purchase 10 shares for $0.50, and in 2 years those shares may be worth $1.00, representing a 100% increase.

 

1. There are significant tax advantages to incorporation.[22] 

 
Disadvantages

1. Most complicated structure[23] – there are several formal requirements of the corporation. Incorporation occurs, which necessitates constating documents (Articles of Incorporation, Bylaws, etc.). These constating documents must be done with a view to the future in order to ensure they do not create future issues for the corporation.

[1] Bryce C. Tingle, Start-Up and Growth Companies in Canada: A guide to Legal and Business Practice, 3rd ed (Toronto, Canada: LexisNexis Canada Inc, 2018) [Tingle, Growth Companies], at 37.

[2] Ibid, at 28.

[3] Government of Canada: https://www.canada.ca/en/revenue-agency/services/tax/businesses/small-businesses-self-employed-income/setting-your-business/sole-proprietorship.html [GoC, Small Businesses].

[4] Ibid; Joshua J. Marych and Mitchell Grimmer, “Three Basic Business Structure: Corporations, Sole Proprietorships, and Partnerships” (2024), online at https://www.parlee.com/news/three-basic-business-structures-corporations-sole-proprietorships-and-partnerships/#:~:text=The%20benefits%20of%20incorporation%20include,the%20most%20common%20in%20Alberta. [Marych and Grimmer, Business Structures].

[5] Government of Canada: https://www.canada.ca/en/services/business/start/register-with-gov/register-sole-prop-partner.html.

[6] GoC, Small Businesses, supra note 3.  

[7] Ibid.

[8] Tingle, Growth Companies, supra note 1 at 36.

[9] Marych and Grimmer, Business Structures, supra note 4.

[10] Partnership Act, RSA 2000 c P-3 [Partnership Act], s.81.  

[11] Partnership Act, s. 56; Marych and Grimmer, Business Structures, supra note 4; Tingle, Growth Companies, supra note 1 at 37.

[12] Partnership Act, s.1(g).

[13] See generally the Partnership Act.

[14] Partnership Act, s. 15. 

[15] Tingle, Growth Companies, supra note 1 at 36.

[16] Business Corporations Act, RSA 2000, c B-9 [ABCA], s.114.  

[17] Ibid, s. 115(1)

[18] Ibid, s.115(3).

[19] See ABCA generally.

[20] Marych and Grimmer, Business Structures, supra note 4.

[21] Tingle, Growth Companies, supra note 1 at 36.

[22] Marych and Grimmer, Business Structures, supra note 4.; Invest Alberta: https://investalberta.ca/why-alberta/tax-advantages/. 

[23] BDC: https://www.bdc.ca/en/articles-tools/start-buy-business/start-business/advantages-different-business-structures#:~:text=Corporations%20are%20more%20complicated%20legal%20structures%20compared%20to%20sole%20proprietorships%20or%20partnerships. 

Overview: Founders, Business Plan, Value Proposition, Strategy 
To best understand the story of WeWork, it is easiest to start it its origin and founder. Adam Neumann (“Neumann”) appears to be the ‘classic’ entrepreneur. He was ambitious, charismatic, and overconfident. He was also a talented pitch artist, as it is no small feat to bring in over $12.8 billion in financing over his time at WeWork.
 
It wasn’t until his third venture, GreenDesk, that ultimately began Neumann’s path to start-up stardom. The idea was sustainable co-working space. The business proved to be profitable in its first year of operation, however, GreenDesk was sold as the two founders differed in opinion with their main investor on the company’s direction. The two founders then started WeWork, with the only change being a shift from a ‘sustainable’ to a ‘community’ concept.
 
The Founders identified an opportunity in the market following the economic crisis in 2008. Neumann stated, “During the economic crises, there were these empty buildings and these people freelancing or starting companies. I knew there was a way to match the two.”[1] This was part of the Founder’s value proposition – individuals and start-ups renting office space without the need and cost of renting out a space larger than they needed. The business model entailed WeWork taking out a cut-rate lease on a floor or two of an office building, chopping it up into smaller parcels and then charges monthly memberships to start-ups and small companies that want to work close with each other. This ‘working close with each other’ was the second part of WeWork’s value proposition. It identified ‘community’ as the main product to sell to its members. The WeWork ‘community’ entailed: open floor plans, lounge amenities, social activities, and floor plan arrangements that were designed to promote entrepreneurs to utilize fellow members' skills and networks.
 
Setting ‘community’ aside, and looking at the fundamental business plan, it is apparent it could be easily replicated. When a business does not derive its value from any type of intellectual property or technology, it must put rapid growth and brand recognition at the forefront of its strategy. WeWork did this on an incredibly impressive scale. WeWork used a large amount of financing to expand at a rapid pace into over 110 cities across 29 countries.[2]
 Financings: (Information from: https://craft.co/wework/funding-rounds)







​

Over the span of 9 years, WeWork grew to an incredible $47 billion placing it as the highest valued private company in the United States in early 2019, ahead of the likes of Space X, Airbnb, JUUL, etc.
 
However, the company came crashing down to earth when WeWork filed for its IPO in August of this year. The prospectus faced harsh criticism from public markets as investors and analysts balked at the overinflated valuation and expressed major concerns about the company. This ultimately resulted in WeWork having to pull its’ IPO. Some of the major issues identified by the public market were the business model, profitability prospects, corporate governance and leadership.[3]
 
Issues: 
a. Profitability and Business Model
The profitability of the company was put into question both short term and long term. WeWork had a net loss of $1.6 billion in 2018, and nearly $700 million in the first 6 months of 2019.[4] It is not uncommon for start-ups to faces losses in their early years but you want to see net loss is shrinking as a percentage of revenue. Whereas, with WeWork the prospectus stated, "These expenditures will make it more difficult for us to achieve profitability, and we cannot predict whether we will achieve profitability for the foreseeable future.”[5]
 
A major concern was if WeWork’s economics could survive the inevitable real estate slump. WeWork was charging high per-square-foot prices but was also locking itself into long-term leases at record rents. There was clearly the prospect of a tenant exodus amid a recession or to cheaper competition.[6] As of 2019, WeWork had committed to $47.2 Billion in future payment obligations but had only received $4 Billion in committed revenue from memberships.[7]
b. Leadership & Corporate Governance
The issues surrounding WeWork’s corporate governance were also a major issue. First and foremost, Neumann had an incredible amount of power in WeWork. His class ‘B’ and ‘C’ shares carried 20 votes to the 1 of the class ‘A’ shares. This allowed for him to still maintain control of the company, even after SoftBank had invested over $10 Billion. Neumann was also said to have engaged with some questionable conflicts of interest with WeWork. When the company undertook to trademark the ‘We’ name, it was then revealed Neumann and the other co-founder had already owned the ‘We’ trademark in a separate corporation and made the company purchase it for over $5.9 million.[8] WeWork also leased properties that Neumann had an ownership stake in. Neumann also received extremely low interest rate loans from the Corporation in excess of $30 million.[9] Neumann’s wife also received a senior management position with the company and was said to possess the power to appoint a new CEO if Neumann were to become incapacitated or die.[10]
 
Because of the failed attempt at an IPO, which now appears actually necessary for funding and not just an exit for investors, WeWork was in need of money quickly. SoftBank, which was already its largest investor, came to the rescue with a package of $5 billion. However, that package was not without scrutiny and further showcases the failures of the board. Specifically, criticism surrounding the package that Neumann received, which included: $198 million consulting position, $970 million for his stock, and a $500 million credit faculty. It is no surprise to hear of criticism considering reports stated that WeWork had delayed layoffs because it couldn't afford to pay severance.
 
Lessons: 
There are plenty of learning lessons for the start-up community and investors resulting from WeWork’s fall. Start-ups can mitigate many of these by ensuring proper safeguards developed in their initial startup process. Legal counsel acting for the company needs to ‘founder proof’ the organization, and prepare for the inevitable transition from the initial founder and management team to a more experienced and suitable one, likely endorsed by the major investors of the company.
 
In WeWork’s case, it faced major financial difficulties removing power from Neumann. This could have been avoided had there been tighter board governance and attention placed on the voting power within the organization. It should have been apparent to the board from the ill-advised spending and poor media attention Neumann was getting for the company that they needed to move on to a better management team. However, the power structure of WeWork made this extremely difficult and extremely expensive. WeWork was not ‘founder-proofed’.
 
Another oversight was that WeWork had no employment agreement with Neumann. For someone to be as important to a company as they touted, it was irresponsible of the board to not have an employment agreement with him. He could have just walked away at any point and this was even identified as a risk in the IPO disclosing. Ultimately, Neumann’s exit was needed, but this could have been a disastrous oversight.
 
As noted above, rapid expansion made sense for WeWork, but it must be undertaken at a responsible rate and direction. WeWork began venturing into areas that were not core to its business which required a lot of capital that was not producing income. Those new ventures coupled with its massive debt laden growth in real estate, became too costly for the company to become profitable. This profitability was quickly identified once the IPO disclosures became absorbed in the public market.
 
Another issue was the extremely optimistic $47 Billion valuation, which clearly wasn’t reality. This can hurt the company two-fold. First, a more realistic valuation would have not received as much push back from the public markets. Secondly, your investors will not be happy when their investment becomes much less valuable when the more realistic valuation is placed on the company.
 
Lastly, the corporate governance practices remain of vital importance. History shows that start-ups fail more often than succeed, so to reduce those chances of failure, planning and execution of these must be done at the outset of any venture. Ensure your start-up has the proper agreements and bylaws in place.
 
Ty Buhler is a member of the BLG Business Venture Clinic and is a third-year law student at the Faculty of Law, University of Calgary.

REFERENCES
[1] Jason Sheftell, “WeWork gives alternative to working at home with swanky buildings across NYC” (22 July 2011), online: New York Daily News <https://www.nydailynews.com/life-style/real-estate/wework-alternative-working-home-swanky-buildings-nyc-article-1.1044412>
[2] Allana Akhtar, “Adam Neumann built a global coworking empire. These are the cities with the most WeWork offices, and how much they cost.” (22 October 2019), online: Business Insider <https://www.businessinsider.com/global-cities-with-the-most-wework-offices>
[3] Jon Banister and Ethan Rothstein, “Here’s everything you need to know from WeWork’s landmark IPO Prospectus” (14 August 2019), online: Bisnow <https://www.bisnow.com/national/news/coworking/heres-what-you-need-to-know-from-weworks-ipo-prospectus-100361>
[4] Ibid.
[5] Ibid.
[6] Alex Konrod, “Inside the Phenomenal Rise of WeWork” (5 November 2014), online: Forbes <https://www.forbes.com/sites/alexkonrad/2014/11/05/the-rise-of-wework/#26eaf94a6f8b>
[7] Supra at note 3.
[8] Kevin Dowd, “10 big thing: WeWork’s IPO in peril” (8 September, 2019), online: PitchBook <https://pitchbook.com/news/articles/10-big-things-weworks-ipo-is-in-peril>
[9] Supra at note 3.
[10] Ibid.

Hiring your first employees is a major step for a young business, one that comes with a new set of new legal challenges and risks. This blog will discuss some of the major legal pitfalls in hiring. Note that this post doesn’t discuss the contractor/employee distinction (which is also very important) because that was covered in a previous post by Sunny Uppal on April 21, 2019.

Don’t Try This at Home
Employment law did not develop with small startups in mind. It emerged at a time when low-paid industrial workers needed protection from massive industrial employers, and it shows. Employment law generally assumes that employers have the upper hand in bargaining power and fairly deep pockets.
For startups, this means that you should always obtain legal information or advice before proceeding with your first hiring. Attempting to draft your own employment agreements (or not using written agreements at all) is walking blindfolded into a minefield of legal issues. Even lawyers have difficulty drafting some provisions to be enforceable, but they can at least assess risks and steer away from the more dangerous areas.

Get it in Writing from Day One
Handshake deals are common in the business world, and while lawyers are generally wary of unwritten agreements that is doubly true in the employment context. The problem is, absent a written agreement, a contract is “deemed” to arise regardless of the parties’ intentions and the terms of that contract will be decided by statute or by the courts.[1] As an employer, these deemed contracts will rarely be preferable to a written agreement and can create uncertainty and risk.

The other issue with these unwritten agreements is that any later written arrangement is treated not as a new contract, but as a modification of the existing contract that arose when the relationship began. This creates a problem of consideration: the legal concept that if a contract is to be enforced in court, it must be an exchange of meaningful value between parties. The problem in this case is that the later agreement can be treated as a modification of the old contract, so if nothing new is being offered then the court will use to the old contract instead.[2] Consider the following example: Jessica hires her friend Dave to do some bookkeeping for her without a written agreement. As the business grows, Jessica begins to look for financing but investors want to see papered employment agreements, so she asks Dave to formalize their relationship in writing at the same pay, hours, benefits, etc. In this scenario, the second contract is likely void for lack of consideration since Dave is providing a benefit to Jessica (a written contract for her investors) but receiving nothing in return except for the benefits he already receives under the old contract. This means their relationship is still governed by the unwritten contract, including the terms that arise by operation of statute or common law. It is important to get employment agreements in writing from the start, to avoid unwanted terms.

All That is Written is not Gold
While it is important to get employment agreements in writing, doing so doesn’t provide complete assurance that the written terms will be enforced. A major area of concern for startups is the possibility that an employee will start a competing business: startups often have low barriers to competition, so it is important to set up proper protections that will be enforceable.

A common tool to this in is the non-competition clause, or “restrictive covenant”. The idea is to prevent a former employee from becoming a competitor by setting up a competing business or going to work for a rival, using the experience they gained as an employee against the employer. While common, non-competition clauses are a tricky area of law. The Supreme Court has been reluctant to enforce such clauses on the grounds that they make it difficult for employees to find work in their area of expertise, which imposes a burden on their ability to earn a living[3]. This means that non-competition clauses require careful drafting, and even then it is wise not to rely on them entirely.

Another way to protect yourself from competing against a former employee is to include strong intellectual property provisions into the employment contract that prevent the employee from wielding the knowledge they gained during their employment against you. Either way, seeking the proper legal assistance is critical.

Kevin Lee is a member of the BLG Business Venture Clinic and is a second-year law student at the Faculty of Law, University of Calgary.

REFERENCES
[1] Employment Standards Code, RSA 2000, c E-9; Kent v Bell, (1949) 4 DLR 561.
[2] Greater Fredericton Airport Authority v NAV Canada, 2008 NBCA 28.
[3] J.G. Collins Insurance Agencies v Elsley, (1978) 2 SCR 916. 

CALGARY's START-UP COMMUNITY: AN OUTLINE OF SERVICES AND SUPPORT
INTRODUCTION
Calgary has many resources and opportunities to support entrepreneurs at all stages in their ventures’ development. Community supports exists for all the hurdles that growing ventures must overcome, whether your business is at the conceptual stage and you need help getting it off the ground, or your venture is growing fast and you need advice or support with bringing employees onboard, marketing your product or service, or finding the right investors. This blog post provides a non-exhaustive rundown of places and services in Calgary that can support entrepreneurs on their journey..
 
RESOURCES FOR STUDENTS
School provides a unique opportunity to learn theory and develop skills across a variety of disciplines, and to network and collaborate with like-minded people, in and out of the classroom.  While these opportunities can help students come up with novel and creative business ideas, often a little more help is needed to take an idea from concept to reality. Many post secondary institutions in Calgary provide resources to help students get their ideas off the ground.

• Hunter Hub

The Hunter Hub for Entrepreneurial Thinking at the University of Calgary has many regularly scheduled and special events for budding entrepreneurs. The Hub offers Touch Down Tuesdays, where students can get drop-in support from experts in business and innovation. Hunter Hub also offers a Summer Incubator program that runs from May to September each year and provides selected graduate students with the resources and training needed to grow their start-up. In November, Hunter Hub celebrates Global Entrepreneurship Week, bringing together aspiring entrepreneurs and innovators to celebrate and share ideas. And of course, the weekly drop-in legal clinic hosted by the BLG Business Venture Clinic on Friday mornings is a great place to get information on issues like intellectual property, business incorporation, employment agreements and much more. Click here to learn more about Hunter Hub.

• WannaB Wednesdays

Bow Valley College hosts bi-monthly ‘Lunch and Learns’ that teach attendees how to tackle many of the problems facing entrepreneurs. Over a free lunch, participants learn about how to generate revenue, choose the right business name, set themselves apart from their competitors and most effectively reach their target market.  Although spaces are reserved for Bow Valley students until three days before each session, any remaining spots are open to the public at no cost. Two weeks after the event, participants apply the tools they have learned by helping a social start-up or struggling social entrepreneur solve a problem they are facing. Find out more here.

• 150 Startups

150 Startups is a province-wide entrepreneurship development program for post-secondary students. Over the course of the program, students have the opportunity to develop, validate, and launch their ventures, as well as collaborate with each other, and compete for cash and prizes in a series of challenges. Lean more here.
 
COWORKING SPACES
In addition to providing a means to keep overhead costs down and maintain flexibility in the early stages of a company’s growth, coworking spaces allow entrepreneurs to connect with one another, sharing skills, costs, connections and ideas. There are many coworking spaces across the city, forming a diverse range of entrepreneurial communities.

• Infusion Coworking

Infusion Coworking is conveniently located downtown. Infusion integrates its members and itself into the broader start-up community by establishing networks with key partners in the city, and with university, private, and venture capital organizations. Infusion offers several different levels of membership, which offer technological amenities like conferencing and AV services, and facility perks such as bike storage, 24-hour access and security, and free coffee and tea. Also available are business consulting services, weekly development programs, and community building events with strategic contacts such as investors and tech specialists. Just need a place to work for a day? They’ve got that too.

• ​Work Nicer

With three locations in inner-city Calgary and one in downtown Edmonton, Work Nicer is Alberta’s largest coworking community. In addition to the basics like mail handling, meeting rooms and printing services, Work Nicer also has perks like pet-friendly areas, beer on tap, and fitness facilities. Work Nicer’s credo is that no one succeeds alone. To that end, the organization carefully curates its membership to bring together people with complementary strengths and a desire to help each other, fostering innovation, and keep costs down, and letting each entrepreneur spend more time focusing on the work that really matters.

• Fuse 33 Makerspace

Fuse 33 Makerspace in southeast Calgary caters to the hands-on creative crowd, providing access to hand and power tools, welding equipment, sewing and electronics labs, embroidery machines and 3D printing. Weekly workshops and certification classes ensure users can operate equipment safely and effectively. Fuse 33 is open seven days per week, so work can be done whenever it’s convenient, and some membership plans even offer temporary storage, guaranteeing projects that can’t be finished all at once remain safe between sessions.

• Trico Changemakers

The Trico Changemakers Studio at Mount Royal University is a coworking and learning space for social entrepreneurs, innovators, activists and artists. Members of the co-working space include entrepreneurs within the for-profit and non-profit sectors who are driving change through innovative products, services and business models. Entrepreneurs can engage with the Studio community to broaden their networks and learn more about applying their skills and passions toward positive, sustainable change across multiple sectors. The space also regularly hosts events for the social entrepreneurship communities of Calgary and beyond. The Trico Changemakers Studio is the combined effort of the Institute for Community Prosperity, the Institute for Innovation and Entrepreneurship and the Bissett School of Business at MRU. Click here to learn more, and join their newsletter for regular event updates.
 
FOR THE LADIES

• Chic Geek

Chic Geek is a non-profit organization with a mission to create a welcoming environment for women at the intersection of technology and entrepreneurship. This is done in several ways. Chic Geek facilitates a mentorship program, and hosts events and workshops that allow participants to connect with experts and the community at large, learning about topics like coding and robotic process automation. There is also an annual ‘Geeky Summit’, featuring speakers with expertise in engineering, blockchain, media, finance and more. Learn how you can get involved here.

• YYC Girl Gang

Girl Gang connects female small business owners, providing an avenue to network and share skills, stories and support. Girl Gang hosts 6 events and 6 workshops per year, alternating each month. Previous themes include how to collaborate with influencers to use social media as a business tool, bookkeeping, and how to price your products. There’s just enough time to sign up for the  Tax Tips for Sole Proprietors workshop on April 16th.
 
MORE RESOURCES

• Platform Calgary

Platform Calgary, formerly known as Calgary Technologies Inc., aims to put a focus on innovation in downtown Calgary. Along with the new name comes a new location at the Hillier Block in East Village. Platform Calgary is working to make innovation more accessible, by providing access to space, programs, mentorship and capital. It welcomes first-time entrepreneurs and established companies alike, ensuring innovators have access to the coaching and resources needed at all stages of their business. Platform Calgary works with the University of Calgary, the Calgary Chamber of Commerce and the City of Calgary, building strategic partnerships and leveraging the city’s entrepreneurial drive.
 
Nothing in this post quite right for you? Don’t worry, there’s more. Click here and here for more extensive lists of resources, events, spaces, meetup groups, and accelerator programs  Getting to know the community is the best way to identify which spaces and programs can provide the advice, support, people or partnerships to elevate your business.

Lastly, please remember that the BLG Business Venture Clinic is always happy to help. Fill out a request form here and we will get in touch to find out how we can help.

Melanie Bowman is a member of the BLG Business Venture Clinic, and is a 2rd year student at the Faculty of Law, University of Calgary.

Contractor or Employee?
Introduction
In a start-up, it is often necessary to hire workers. To avoid legal obligations to employees, entrepreneurs will often characterize these workers as independent contractors. However, defining a worker as an independent contractor does not automatically make that worker an independent contractor. Rather, whether a worker is an independent contractor or employee is determined by examining the substance of the relationship between the worker and employer.[1] There are various common-law tests available to examine the substance of this relationship. Importantly, no particular common-law tests is determinative about the legal status of the worker.[2] Regardless, this blog will provide a brief overview of the primary common-law test used by courts, the fourfold test.
 
Four-fold Test
In Montreal v Montreal Locomotive Works Ltd et al, (“Montreal Locomotive”),[3] the House of Lords articulated the fourfold test. In summary, the fourfold test requires examining whether (1) the alleged employer is exerting control, or has the power to exert control, over the worker, (2) whether the worker owns the tools of his trade, (3) whether the worker has the chance of profit, and (4) whether the employer has the risk of loss.[4]

Control Test
Control is the right to give orders to a worker regarding where, when and how work is performed. Workers required to follow such orders are more likely to be employees. Independent contractors typically determine the hours, place and method of work for themselves.
Examples of control include the employer’s right to:

• Hire.

• Set hours of work and approve time off.

• Supervise work.

• Instruct on the method of work.

• Require reports or meetings.

• Restrict the kind of work a worker may perform or the type of product he may sell.

• Restrict who the worker may perform work for or sell a product to.

• Restrict or approve assistants or subcontractors hired by a worker.

• Set codes of conduct.

• Impose discipline.

• Enforce non-solicitation or non-competition terms against the worker.

• Dismiss the worker.

 
Ownership of Tools
A worker who owns and supplies the tools, materials, licenses and contacts required to perform agreed work is more likely to be conducting his own business and be considered an independent contractor. A worker who is supplied with these things by an employer is more likely to be part of the employer’s business and considered an employee.
 
”Tools” is a catchall term used to describe a wide variety of items and resources required to perform work, including:

• Hand tools such as hammers, screwdrivers, handsaws, etc.

• Power tools.

• Vehicles, including transport trucks.

• Construction equipment.

• Trade licences and certifications.

• Client lists.

• Demonstration products and promotional materials.

• Offices and office equipment.

• Computers and other electronic devices.

 
Chance of Profit and Risk of Loss
Exposure to profit or loss on a work contract is indicative of an independent contractor. As a business owner, an independent contractor makes expenditures on equipment, workers, advertising, licenses, or other resources. Having contracted for a particular volume or quality of work, his return is affected by how efficiently he can meet that volume or quality.
 
In contrast, employees typically invest only their time in performing work. They are usually paid wages or salary and do not run a risk of loss if work is not performed efficiently. Likewise, they are typically not entitled to share in increased profits resulting from their work.
 
Conclusion
In conclusion, entrepreneurs must be careful whenever retaining a worker. Although the entrepreneur may be under the impression, they are retaining the services of an independent contractor, they may in fact have hired a new employee.
 
Sunny Uppal is a member of the BLG Business Venture Clinic, and is a 3rd year student at the Faculty of Law, University of Calgary.

References
[1] Kaszuba v. Salvation Army Sheltered Workshop (1983), 83 C.L.L.C. 14,032 (Ont. Div. Ct.)
[2] 671122 Onatrio Ltd v Sagaz Industries Canada Inc, 2001 SCC 59 at para 46 [Sagaz Industries].
[3] [1947] 1 DLR 161.
[4] Montreal (City) v Montreal Locomotive Works Ltd (1946), [1947] 1 DLR 161 at p 169 [Montreal Locomotive].

Mobile Food Vending: A Beginner’s Guide
Have you ever thought about operating a food truck? In the U.S. at least, the food truck industry is now generating $2 billion-plus in estimated revenue with the industry’s overall revenue having grown 300% over the last three years.[1]
Though the food truck craze likely peaked a few years ago, mobile food vending may still provide budding entrepreneurs exciting opportunities to get their feet wet. Some carts and concession stands can be purchased at an attractive price point, and even food trucks, which will likely require a larger investment upfront, can be run with modest operating costs. There is also something appealing (at least to the author of this blog post) about parking your colourful truck next to the sidewalk, playing your favourite music, and dishing out your choice of delicacy to a lineup (one would hope) of eager patrons. You may also like the idea of being part of the festival scene, which largely depends on mobile food vending to keep the good people of Calgary happy and fed. If meals on wheels speaks to you like ones and zeroes probably spoke to Bill Gates, listen up; you’ll need to clear some red tape before you can get started.
 
Food Handling Permits
If your mobile food vending operation is going to require you or your staff to handle food, you will need a food handling permit. Alberta Health Services classifies mobile food vending units according to the type of food that will be handled, the manner in which said food will be handled, and the extent to which such handling presents a risk to the public. Depending on how your mobile unit is classified (types A-F), you will need to meet certain requirements, such as a minimum number of sinks or a minimum amount of fresh water that you have to have available for use at all times. Additionally, if you are not planning on preparing food in the mobile food vending unit itself, you will likely need to set up a “Base of Operations,” which would entail designating a space for food storage and preparation and then receiving approval from Alberta Health Services.
 
Business Permits
Next, you’ll need some business permits from the folks at the City of Calgary. First and foremost, anyone offering mobile food services will need to obtain a municipal business licence. The next step will depend on what kind of vending unit you plan on operating and where, exactly, you plan on parking it. If you want to operate from city streets, you’ll need to licence your mobile unit as a “full service food vehicle.” This type of licence requires a safety code inspection, which is coordinated in conjunction with a business licence fire inspection and can be scheduled by calling 311. You will also need to have a commercial vehicle licence and an insurance policy with at least $2 million of coverage in place before a full service food vehicle permit will be issued. Those wanting to park their full service food vehicle at a special event will also need an additional special event inspection (also scheduled by calling 311).
If you plan on operating only from private property, or if you want to operate a pushcart outside of the downtown core, you can instead apply for a “food service – no premises” licence type. This licence will not require the building safety and fire inspections that a full service food vehicle would, although you will still need an insurance policy with at least $2 million of coverage in place before a permit will be issued. Note that this type of licence allows individuals to operate downtown between the hours of 7 am and 3 am. Some examples of food service – no premises mobile vending units include: food trucks that only operate at festivals or only sell pre-prepared foods, pushcarts outside of downtown, bicycle vendors operating on roadways that do not meet the definition of pushcart, ice cream trucks, and catering trucks. It is also important to note that operating your business on private property (regardless of how you’ve licenced your mobile vending unit) will require the property owner’s written consent.
 
Other Considerations
Regardless of which licence type you ultimately decide on, there will, of course, be fees (see the City of Calgary link provided below). You will also need to ensure that you dispose of any grey water (waste water from cleaning dishes and the like) at an approved location. Those who want to operate on Stephen Avenue Mall, Barclay Mall or Eau Claire Market will also need approval from the Downtown Association. Given that your business may feature sharp objects and open flames, you may also want to think about liability and how you will structure your business (i.e. whether to incorporate).
So there you have it, the basic steps you need to get your mobile vending unit business up and running. Ultimately, one of the great things about food trucks and mobile vending units is that the municipal and provincial governments have put resources towards streamlining the licencing process. If you’re a first-time entrepreneur, that means less red tape and more time to dial in your menu, your branding, and your food trucks awesome paint job.
 
For more information on Food Handling Permits, visit: https://www.albertahealthservices.ca/assets/wf/eph/wf-eh-mobile-food-vending-units.pdf
For more information on mobile food vending in the City of Calgary, please visit: http://www.calgary.ca/PDA/pd/Pages/Business-licenses/Mobile-Food-Vendors.aspx
To view the City’s fee list, visit: http://www.calgary.ca/PDA/pd/Documents/fees/business-licence-fee-schedule.pdf
 
Aleksandar Kukolj is a member of the BLG Business Venture Clinic, and is a 3rd year student at the Faculty of Law, University of Calgary.
 
References
[1] Sam Milbrath, “12 Impressive Facts on the Food Truck Industry” (May 17, 2018) online: https://www.food.ee/blog/12-impressive-facts-on-the-food-truck-industry/.