We have this club in Toronto, and it has a little CafePress online store. We want to sell merchandise with club-related artwork and raise a little cash for the club.
We’ve designed some artwork for the merchandise, but we need more; I seem to be the only one there with inclinations toward drawing, and I can’t draw everything. 
So we had the idea of running an online contest to attract more and different art. We’d announce it on the club web pages, in certain mailing lists, and in selected external websites. There (just maybe) might be print advertising in a number of magazines, or locally through posters, although leadtimes/expenses may nix those ideas.
So… my questions.
How do these type of contests handle copyright issues? Do submitted artworks typically become copyright to the club?
Are there any legal liabilities?
Do we need a business license/gaming permit/other official permission? (Jurisdiction: Toronto, Ontario, Canada)
What other pitfalls are there in running such a contest?
Thanks!