With all the considerations and steps that are necessary with marketing and advertising efforts, critical legal issues may be overlooked resulting in disputes and, possibly, lawsuits. Before spending time and effort with marketing and advertising, it is important to review important matters, such as the appropriateness of your business name and the content of your advertising materials.
Business Name
The primary purpose of your business name is to enable the public to distinguish your products from those provided by others, especially competitors. Whether they involve distributing business cards or publishing ads in the media, marketing and advertising efforts are intended to enhance this distinction. Problems arise when your business name is too generic. A generic business name does not enable the public to associate your name with your products. Much of your marketing efforts have gone to waste. Problems can also arise when your business name is too similar to the name of another business. This is especially a problem if that other business is a competitor or a business with whom you do not want to be confused. The other business can legally challenge the use of your business name if they have prior rights to use their name and can force you to change your name which is inconvenient and costly.
To avoid these problems, it is vital that you choose your business name carefully. This also applies to the name you give to your products and to any slogans that you use in an advertisement. Comprehensive name searches are available to assist you in this respect. You should also consider registering a trade-mark for your name or slogan. The main advantage of doing this is that you will have enhanced rights to use your name or slogan and to prevent others from using it and trading off the goodwill you have developed through your marketing and advertising efforts.
Advertising Materials
When you create marketing and advertising materials to promote your business, it is important to be aware of the various copyright issues that may arise. For example, when you develop materials that incorporate words, diagrams, pictures, designs, audio or video which were not created by you, it is important to determine whether these materials are subject to copyright. If they are, then you are not legally entitled to use this content unless you obtain authorization from the copyright owner. If you do not, then you will be liable for copyright infringement. As example, when you contract a consultant to develop marketing and advertising materials for you, it is important to reduce that contract to writing which expressly states that all intellectual property rights to the work created by the consultant belong to you. Otherwise, the consultant can claim that they own the materials developed for you and could prevent you from using these materials in the future. Furthermore, the written contract should expressly state that the consultant waives his moral rights to the materials. Moral rights are rights that an author has to the integrity of the materials (i.e. no changes to the materials) and to be associated with the materials (as the author). If moral rights are not waived by the consultant, then you will not be able to make changes to the materials to accommodate your purpose. In addition, the written contract should also contain a representation from the consultant that they have not infringed upon the intellectual property rights of others and a promise that the consultant will indemnify you for any costs associated with someone suing you for copyright infringement.
Financing Your Business
Money. Everyone needs some. No one ever has enough. In the business context, money is essential to start up, maintain and grow a business. The following is a brief overview of some of the resources to consider when seeking financing.
The first source of funds is a financial institution such as a bank. Because banks usually lend funds to small businesses only if they have an established revenue history and significant assets, such financing may be difficult to obtain if the business has few assets relative to the amount of funds it needs. A bank may be more willing to provide a business loan in exchange for security over personal assets.
A second source of funds is private sources. This may be the only resource for businesses which are just starting up or which have early high capital needs with delayed revenue potential. Examples of private sources are the following:
Personal Funds are personal assets of a business owner and are tapped in two ways – directly, by lending cash to the business or indirectly by taking on personal liability (giving personal guarantees or mortgaging the house). Personal investment is often a prerequisite to obtaining funds from other sources. From a legal perspective, it is important to document the personal investment to avoid problems in the future should the business be sold or become a publicly traded corporation.
"Love Money" is direct or indirect funding from family and friends. Proper documentation of any investment or loan from a friend or family member is important. As well, if the funding is by loan, the friend or family member should consider obtaining security over the assets of the business.
"Angel Investors" are private, non-institutional, informal investors who fund businesses to take advantage of the opportunity to provide the investor greater returns than other typical investments. Angel Investors usually seek businesses with a solid management team and significant revenues and, therefore, are generally not interested in early start-up business.
Venture Capitalists have access to a significant pool of funds to invest in established businesses with solid management and a good potential for providing significant returns. They are well organized and generally have expertise in the industries of the business in which they invest. As with Angel Investors, they are generally not interested in early start-up businesses.
Investment or Merchant Bankers assist with acquiring private capital from major funding sources and are typically retained by a business when large amounts of funds are required to fund a major business transaction (e.g., purchase of another business or merger). Investment and Merchants Bankers also provide other services including assisting a business to become a publicly traded company.
Strategic Partnerships with other businesses which have common or compatible interests could be a source of funding, particularly if the business has an asset that can be licenced to the partner in exchange for a lump sum payment and royalties.
A third source of funds are government-sponsored agencies and organizations. They, however, typically only fund established businesses that require funds for growth. Some sources include:
Business Development Bank of Canada – a federally owned financial institution which provides loans and consulting services to Canadian small businesses.
Canadian Small Business Financing Program – a federal program which partially guarantees loans made by traditional financial institutions to businesses for the purchase or improvement of real property or equipment, the improvement of leasehold property or the necessary operation of the business.
Agriculture Financial Services Corporation – is a provincial organization that provides loans for the purchase of assets or an existing businessor for the restructuring of business debt or to start-up a business.
There are many other government-sponsored agencies and organizations that provide industry specific assistance.
If a sale or issuance of shares of the business (corporation) is contemplated to raise funds, special attention should be taken of the restrictions imposed by the Securities Act. These restrictions apply to shares of both publicly traded and private corporations. The securities law relating to the sale or issuance of shares is complicated and beyond the scope of this article. Legal advice should be sought when considering these types of transactions.