Top Legal Mistakes Small Businesses in Alberta Make

Starting a small business is exciting — but it’s also full of legal pitfalls that many owners don’t see until it’s too late. From choosing the wrong structure to skipping shareholder agreements, these mistakes can lead to disputes, tax issues, or even business failure.
This plain-language guide from our Business Law team at Libra Law highlights the most common legal mistakes small businesses make in Calgary and how to avoid them.

Mistake 1: Choosing the Wrong Business Structure

Should you operate as a sole proprietor, partnership, or corporation? The decision affects your taxes, liability, and growth potential.

Many businesses start as sole proprietorships for simplicity, but later realize they need the liability protection and tax benefits of incorporation.

If you’re unsure which path is right, explore our incorporation services in Calgary and get advice before you make the leap.

Mistake 2: Not Having a Shareholder Agreement

If you’re starting a business with partners, a shareholder agreement is essential. Without it, disputes over profits, decision-making, or ownership changes can quickly derail your company.

A properly drafted shareholder agreement in Calgary clarifies roles, protects your investment, and provides a roadmap for the future.

Mistake 3: Mixing Personal and Business Finances

Many business owners use personal accounts for business expenses, creating accounting confusion and legal risk. Proper separation of finances:

• Protects you from personal liability.
  
• Simplifies bookkeeping and tax compliance.
  
• Makes it easier to attract investors or partners.
  

Our Business Law services can help you set up the right legal and financial framework from the start.

Mistake 4: Ignoring Employment Law Obligations

Even small businesses must comply with Alberta’s Employment Standards Code and common law provisions. Having appropriate corporate policies in place helps your business manage risk, set consistent expectations, and support a healthy workplace culture.

Failing to provide proper contracts, termination notices, or severance can lead to costly litigation claims. Issues often arise with wrongful dismissal, termination pay, overtime pay, or misclassifying contractors as employees. Our Employment Law team can help ensure your workforce is managed legally and fairly.

Mistake 5: Overlooking Corporate Records

Every corporation is required to maintain accurate records — including filing annual returns, preparing annual resolutions of directors and shareholders, and meeting minutes.

Neglecting these obligations can lead to penalties or problems when you apply for financing or sell your business. Learn more in our article on the importance of corporate records.

Mistake 6: Not Planning for Succession

Many business owners don’t plan for retirement, the sale of their business, or unexpected events. Without a succession plan, your business could be left in limbo.

Integrating your company into a broader estate plan ensures continuity and protects your family. Our Wills & Estates services can help build this plan.

Mistake 7: Waiting Too Long to Get Legal Advice

Too often, business owners only call a lawyer after problems arise. By then, solutions are usually more expensive.

Working with a business lawyer in Calgary early can help you:

• Avoid disputes before they start.
  
• Protect personal and business assets.
  
• Ensure contracts and agreements are enforceable.
  

Related Reading

• Buying a Business That Employs Foreign Workers
• Do I Need a Lawyer to Incorporate?
• More resources in our Articles section

Final Thoughts

Small businesses are the backbone of Calgary’s economy — but legal mistakes can threaten even the most promising ventures. By avoiding these common missteps, you’ll protect your company, save money, and build a stronger foundation for growth.

At Libra Law, we help Calgary entrepreneurs safeguard their businesses with clear, practical legal advice.

Talk to a Calgary business lawyer today and make sure your company is built on the right foundation.

NOT LEGAL ADVICE. This article is for general informational purposes only and does not constitute legal advice. To obtain advice specific to your situation, please consult a lawyer or qualified professional.