Here Comes the Sun

Brighter days are on the horizon, according to leading financial experts in Ottawa. Canada is emerging from the financial recession. According to recent statements to reporters by Federal Finance Minister Jim Flaherty, the Canadian economy has stabilized and recovery has started. Mr. Flaherty noted that consumer confidence is relatively strong and continuing to grow. This is reflected in improved retail sales and positive numbers of home sales. He added that nearly 1000 infrastructure projects are currently underway across the nation.

The Bank of Canada strongly supported Mr. Flaherty's statements, forecasting that the economy will bounce back much faster than that of the United States. The Bank predicted that the summer quarter should produce growth of almost 1.3 percent, following three consecutive quarters of contraction.

Bank of Canada officials cautioned, though, that Canadians should not become overly optimistic, and should keep the country's financial recovery in proper perspective. The tenuous financial positions of both the U.S. and Europe may continue to affect Canadians. Canadian government stimulus spending must also be rescinded at the proper rate in order to not be counter-productive.

Canada has not incurred massive deficits in recent years, thus contributing to its relatively strong financial position and its ability to recover from the recession in a shorter period of time than others. Leading bankers in the U.S. are also predicting recovery for the American nation. However, due to massive government debt, the fragile American economy has been slower to recover. The decline of the American economy has slowed its pace and analysts predict that growth will begin in the latter portion of this year.

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When Will the Economy Be Stable Again?

This is the question on the lips of many economists and regular citizens alike. According to the Bank of Canada, the economy is in an upswing. However, complete recovery, or a return to economic levels prior to the recession, should not be expected until mid-2011.

Although economic indicators are showing upward trends, restructuring in major industries such as auto and forestry – to name but two of many – will take some time, thus slowing economic activity. Another key factor is the increasing strength of the Canadian dollar. The return of a strong dollar – currently trading at nearly 91 cents U.S. - will hold back exports. Mark Carney, governor of the Bank of Canada, has warned that the dollar's raid rise may "fully offset positive factors" in the economy. However, economists seem certain that Mr. Carney is unlikely to intervene with the dollar's growth, thus maintaining the policy of the Bank of Canada for nearly a decade.

A strong Canadian dollar is not all bad, though, for the economy. While it increases the price of Canadian exports, conversely it decreases the price of imports. As the demand for imports is quite high, the strength of the Canadian dollar is beneficial to consumers.

Another indicator of recovery on the horizon is the decision by the Bank of Canada to reduce the amount of cash that it was injecting into the banking system. This measure was adopted when credit markets seized up in the final quarter of 2008. The banks have reduced their dependence on this cash influx, thus generating the central bank's decision. However, the Bank of Canada will maintain its commitment to provide liquidity as necessary to support the stability of the nation's financial system.

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The Sky's the Limit in an Economic Downturn

Call the current economic climate whatever you wish – downturn, recession, slowdown. For some, there is only one word – opportunity.

There is no question that the economic world has changed as a result of this downturn. However, business has not ceased, nor has cash become a thing of the past. Here and there, savvy business entrepreneurs have kept their eyes open and found niches of opportunity to make money – lots of money – at a time when others are unsure of their financial futures.

SwiftJet is a private charter jet service based out of Toronto's Pearson International Airport. While commercial airlines are restructuring and trimming due to reduced air travel, this airline is booked solid. The company's founder and chief executive, Bassam Al-Sarraj, realized that corporate executives have neither the time nor the patience for flying commercially. Traveling by private jet is a necessity, not a luxury for many business executives. The need to meet in several distant places in a short span of time negates flying commercially. Time spent with check-ins, baggage drops, security checks, and boarding time is precious productive time lost in the business world. SwiftJet operates to meet the needs of the corporate executive. All the amenities of commercial airlines are made available. And, this airline guarantees that the passenger's luggage will never be lost.

It is true that some companies that previously owned their own private jets have sold their planes in order to trim their finances. However, entrepreneurs like Mr. Al-Sarraj realized that the companies still needed that service. He merely allowed large companies to reduce their operating overhead by a unique type of outsourcing.


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Bank of Canada: Hiring and Sales to Go Up Within a Year

Businesses in Canada say things are looking up after a difficult year, as per a new Bank of Canada survey. One hundred companies were polled in May and June.

Sales are expected to increase in the next year according to 61% of senior managers polled in the quarterly business survey. This is the first positive forecast for sales from a majority of execs surveyed since the 3rd quarter of 2008. In the past year, sales went down according to 69% of respondents, which was a record amount for this poll.

In addition, more companies plan to do more hiring in the next 12 months (39%) than those who plan to lay off employees (17%).

The Bank of Canada comments that in general their results show that businesses expect the economy to improve, but slowly, still conservative about investing.

This is an extremely positive outlook for Canada and as well for the US. But the companies surveyed still don't see US demand increasing in a big way next year. So they estimate that they will spend less on investing in the upcoming year. The results in this area have been negative for the past 2 years as well.

And despite some claiming to have reduced their production capabilities already at this point; the bank says very few businesses report that they would have a hard time meeting unforeseen swells in demand. A greater number of businesses also believe their product prices will be lower next year.

Senior loan officers, polled separately, reported that in the second quarter of 2009 the conditions for lending continued to contract. However, this time the bank explained that the tighter lending was industry-specific than in previous surveys and found more in such areas as the auto sector, forestry products and transportation.


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Economic Growth is on the Horizon

While it is not predicting the end of the economic recession – the worst since the Second World War, the Canadian government is presenting a bright outlook for the immediate future. The government now thinks that the current year's downturn will be less severe than earlier predictions and growth for 2010 will be stronger. As expected, the Bank of Canada is keeping its key policy rate at 0.25-per-cent – an historic low and has pledged to keep that rate until the spring of 2010.

In a move that has surprised some economists, the central bank has reduced the amount of money available to chartered banks in order to support borrowing and lending. Bank Governor Mark Carney has noted that some banks were not drawing down as much money as the Bank of Canada was making available, Mr. Carney cautiously sees this trend as a strong indicator of improving financial markets.

"Stimulative monetary and fiscal policies, improved financial conditions, firmer commodity prices, and a rebound in business and consumer confidence are spurring domestic demand," according to a recent statement released by the central bank.

Mr. Carney has improved his financial forecast for the Canadian economy. An earlier April forecast of three percent annual contraction has been reduced to 2.3 percent. Similarly, he has increased his 2010 growth projection by half-a-point to 3.5 percent.

While agreeing that the future is looking brighter, leading analysts at several of the nation's leading banks view Mr. Carney's outlook as overly optimistic. Most forecasts in the private sector are limiting growth in 2010 to 2.0 percent.

In any event, Mr. Carney has not changed his opinion that complete economic recovery will not be realized before mid-2011.


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Organizing Your Corporation – The Basics

The internal organization of your corporation is a vital initial step. Even the smallest of companies must adhere to these organizational steps. An orderly beginning will direct you to a well organized business.

Although you were required to list the first members of the corporation's board of directors when you incorporated, this group essentially gets the business "off the ground." At the first meeting of the corporation's shareholders, the permanent directors are elected. While all this may sound rather grandiose for a small company, keep in mind that your rights and obligations are no different than the "major players."

At an early date in the corporation's organization, one of the initial directors will call an organizational meeting. All the initial directors must receive notification in writing at least five days prior to the meeting. The notification must indicate the date, time, and location of the meeting.

What is the purpose of this meeting? Several items, which must appear on the agenda, may be discussed:

• creating by-laws of the corporation (the by-laws have to be ratified by the shareholders at the first annual meeting);
• adoption of forms of security certificates and corporate records;
• appointment of officers;
• authorizing issuance of shares and/or other types of securities;
• appointment of an interim auditor until the shareholders ratify the appointment;
• organize banking protocols; and
• discuss any outstanding pertinent issues.

Keep in mind that it is imperative to keep written minutes of all meetings as well as copies of all documents, agendas, correspondence, etc. An orderly set of records may be very useful for you at a later date. It also may be necessary in the future should there be any need for clarifications by government or other official agencies.

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Annual Requirements of your Canadian Corporation

When your corporation was first established, you were obligated to file certain documents including the Articles of Incorporation. However, in order to maintain your status whereby your corporation benefits from the Canada Business Corporations Act (CBCA), there are certain necessary requirements that must be fulfilled on an annual or periodic basis.

Every registered corporation is responsible for filing an Annual Return. The information contained in this return confirms that your corporation is complying with certain requirements, as outlined when you filed for incorporation. Within 60 days of the corporation's anniversary, the annual date must be filed. The anniversary date appears on the corporation's Certificate of Incorporation. Any of the company's directors, or an agent authorized by the directors, may sign and file the Annual Return.

It is imperative to maintain the good standing of your corporation. Failure to file your Annual Return may result in the company's dissolve by legal order.

If your corporation should move to a new address within the same province or territory, this address change must be registered with the governing agencies within 15 days of the move. Similarly, a change of mailing address of the corporation (not necessarily a physical move of the company) must also be registered. If your corporation moves to a different province or territory, you must amend your Articles of Incorporation.

Changes to the Directors of the corporation must also be registered. These changes include:

• Appointment of new directors;
• End of term of a director;
• Change of address of a director.

It is important to know that the names of a corporation's directors are public information and, therefore, the information must remain current. If the number of directors changes from the original Articles of Incorporation, this change must be registered.

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Adding a Trade Name (DBA) vs. Amending your Corporation Name

Corporations often start a business with one particular activity in mind but as things evolve and change, they want to be able to do business under a different name. Sometimes corporations want to change their legal name while others want to simply do business under a different name without incorporating a new business.

There are a couple options you can evaluate for these type of situations: trade name registration or “a doing business as” (also known as a “DBA”) filing, which will allow your corporation to use a different name, or a name amendment, which would legally change the name of your corporation.

Businesses are allowed to use names other than their legal names to conduct business. There are many terms for doing this, including DBA, which stands for doing business as, fictitious business name, assumed business name, or trade name. If a business uses another name, it must comply with provincial specific name requirements. Check out this video on business names for more info.

Trade name requirements can vary by jurisdiction. Typically, a filing must be made at the provincial level to register the name your business plans to use, and a filing fee paid. All provinces have their own name requirements for trade names. We recommend that you check with your provincial companies office for such requirements.

Once you have registered your trade name, your corporation can begin using that name in addition to its legal name. You may need to advise your bank of this new trade name if you intend on receiving checks under this new trade name. Typically, a copy of the registration will be sufficient. This allows you to have separation within your business, without the formation of a subsidiary. However, if you are considering establishing a subsidiary for other reasons, it is best to seek the advice of a lawyer or accountant.

Another option would be to change the legal name of your corporation. One thing you should consider when doing this is the business purpose on record with the jurisdiction for your corporation. If your articles of incorporation limit the activities of your corporation, amending your name may cause the corporation to extend past its current business purpose. If the business purpose listed in your articles of incorporation is a general clause, such as “all lawful business,” or “no restrictions” then changing your name would still be covered by your business purpose. Where this is an issue, amendments to the business purpose can be done simultaneously to the business name amendment. All incorporations effected through CorporationCentre.ca have no such limitations.

To effect a corporate name amendment to the Articles of Incorporation, the proposed amendment must be authorized by a resolution adopted by the board of directors. The resolution must then be ratified by the shareholders present at a special general meeting, in such percentage as required by the applicable law, at which time the shareholders also authorize one director to sign the Articles of Amendment. Typically, an amendment to the Articles of Incorporation must be confirmed by a greater majority (2/3 or 3/4 depending on the jurisdiction) of the votes cast by the shareholders at a special general meeting.

Moreover, a Name Search Report (for jurisdictions that accept only accept a NUANS report, it must be less than 90 days old) or an actual pre-approval (for jurisdictions like B.C., Manitoba, and Nova Scotia not older than 60 days).

Once this is done, the Articles of Amendment are filed with the relevant jurisdiction office, together with the prescribed government fee and name search report.

The government fees related to filing articles of amendment are as follows:

Jurisdiction Fee

Federal $200
Alberta $150
British Columbia $225
Manitoba $135
NFLD & Labrador $100
New Brunswick $110
Nova Scotia $150
Ontario $150
P.E.I. $260
Quebec $140
Saskatchewan $120

Following the processing of the Articles of Amendment by the government office, A Certificate of Amendment is issued confirming the change of the legal name of the corporation. The change of corporate name becomes effective from the date appearing on the Certificate, does not affect the corporation's rights or obligations.

Starting a Business - Business Registration or Incorporation?

One of the first decisions an entrepreneur or small business owner needs to make when incorporating is what form the business should have. There are generally three options in Canada, namely, sole proprietorship, partnership or corporation.

On our website there is good summary of each kind of Canadian business organization for review. I have also drafted a brief white paper on this topic. Also, I wrote an article about the selection of a business legal form for franchises.

You can also review our videos on YouTube on business registrations (sole proprietorships) and incorporations.

At the end of the day, while most businesses will select incorporation, this may or may not be the best way to start depending on your specific circumstances. As always, a competent lawyer and or tax specialist should be consulted.

Boomers as Entrepreneurs and Temps: Helping the Economy

As many of those in the baby boomer generation contemplate retirement, the workplace will definitely be impacted, but how? Many of them see they have less money saved than expected, be it in a 401K type of account or pension and see the need to return to or continue working.

Even as recruiters suffer due to fewer temporary workers being sought out, recruiting companies like Robert Half International (whose sales fell by 30% at the beginning of 2009) are going after the baby boomers. They are very skilled and ready to work once corporations go back to more hiring. This trend appeared in BusinessWeek as reported by Ali McConnon in their June 30 issue. A greater workforce of experienced individuals can turn around the recruiting industry, since their track record is proven and they need less training. The corporations are willing to pay more for them also.

As temps, the boomers are a worthwhile market for the recruiters since they are more likely to continue as part-timers as opposed to younger workers who just temp until they can find something full-time. As such recruiting companies are seeking out boomers through organizations like the AARP and CARP.

Entrepreneurial Start-ups

Like we have discussed in previous posts, small business looks like it has the potential to succeed in many ways despite the current recession. According to Tony Wanless of the National Post, many North American boomers are aspiring to start businesses as opposed to pursuing leisure activities in their retirements. On the whole they are healthy and have a strong drive to succeed in life. The Ewing Marion Kauffman Foundation that studies entrepreneurship, even sees the 80 million boomers leading the way out of recession.

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