creative briefing

This post is written by guest-blogger Kevin Huynh. Kevin is the Finance Director of a Toronto-based creative marketing firm and knows a thing or two about the formalities of setting up a creative practice.

Incorporating may not be the best decision for your company right now. But maybe it is. There are a number of points to consider in relation to your company’s long term plan and overall strategy before making this decision. In this post, I’ll take you through the reasoning that my agency went through in deciding whether or not to incorporate. Hopefully these considerations will prove useful as you decide whether formalizing your practice is the right step for you. 

Why was incorporating right for us?

Our creative marketing agency decided to incorporate because we wanted to create a business that was credible, scaleable, sustainable and fostered ownership.

Credibility
Being able to tell clients that we were a registered corporation gave our clients comfort in doing business with us. The extensive work involved in being a Canadian corporation translated into commitment. It implied to our clients that we were here for the long run and we would deliver on our promises

Scaleability
We knew if we wanted to grow the business through the acquisition of more resources (e.g. people), we needed something that would help us raise capital (funding) through investors. It also allowed more people to be involved with the company. As well, by default a structure was already in place in how investors would contribute to the business in exchange for the fact that the company would act in their best interests.

Sustainability
The company was started by a dedicated individual, and joined by others. With an ever increasing number of bodies involved, if the key personnel ever left to pursue other opportunities, we would take comfort that the company would not be affected legally because it was a separate entity. In contrast, in a sole proprietorship or partnership, if the founder or partners leave, the business would end as well. That wouldn’t go over well for the remaining individuals who put their sweat into building a business only to see it disappear. A corporation essentially has an infinite existence

Ownership
As a relatively young company, we’ve had to make many decisions for the first time with no past experience to rely on (like most start-ups). Before incorporating, the company ran as a sole-proprietorship. However, as more people came aboard we wanted to align their interest with the company’s through ownership (in the form of shares). This also gave compensation to individuals that played important roles in developing the business.

These are four simple reasons why incorporation was the right move for us. Your reasons may differ. Regardless, take the time to analyze your current situation and discuss it with any key business partners. It never hurts to seek advice from experienced friends or acquaintances when making major business decisions for your company.
 

Part 3 (now available): So you’ve decided to incorporate… what now? Find out here.

Missed Part 1? Read it here.