Small Business Series #5: Why Should You Have an Exit Strategy?

Planning a policy to close your business may seem counter-productive to the effort you invest in maintaining the life of your small business, however, creating an Exit Strategy may be one of the smartest decisions you make, and you will thank yourself later for planning ahead. Creating an exit strategy does not necessarily mean you are planning to hang the “Closed” sign on your doors, and shut down permanently. Often, an exit plan is designed to set your business on course to sell to a buyer, pass on to family, or alleviate management stress from your own shoulders while maintaining the vibrancy of your business.

Keep Your Goals In Mind

Before you draft your exit strategy, envision your goals for yourself, and your business. Planning now creates more leverage for you, as the business owner, in how you wish to shift control of the business, and to keep your business in optimal condition for transfer. Consider the following:

  • How involved do you wish to be after the transfer of the business? If you prefer a clean break, or complete relief of your obligations to the company at the time of transfer, then selling to a competitor, or another buyer may be a good option. Conversely, if you wish to remain involved in the business after transfer, you may consider transferring to a family member, or employees to retain some control of the process.
  • Keep in mind your target buyer as you prepare to sell or transfer your business. Would you like to see your business retain the same, or similar identity and business functionality? You may want to keep employees or other small companies in mind as buyers. Selling to a larger, commercial company may have intentions to incorporate your business into their corporate identity, however, it may also ultimately be more profitable for you when you are ready to sell.

Prepare For the Essential Steps

Part of your Exit Strategy should include the steps you will need to take as you approach the transfer, or sale of your business. Exit Strategy steps generally include valuation of your business by an accountant, bringing your accounts as current as possible by collecting accounts receivable, and paying off business debt, and maintaining records as well as possible. It is helpful to hire an accountant, and a small business lawyer, to help you meet these goals. Additional preparation may include a plan for how you will delegate other responsibilities you take care of, and how you will notify employees and customers of your business transition to a new owner.

Whether you need a plan for implementation now, or much later, writing your Exit Strategy will give you piece of mind, and create a plan for your business to transfer to ownership on your own terms.   

Call Behrends Legal today for more information! (970) 578-9455, or info@behrendslegal.com.

Small Business Series #3: Employee Agreement Contracts

            As your business infrastructure grows, you will face the same question asked by so many other business owners: Is my business financially and logistically ready to hire employees? While you address this question, identify the key reasons you need employees, and lay a positive foundation for adding employees to your business organization.

            Your business should be prepared to hire employees by building employment contracts into your list of legal necessities. An employee contract serves to protect both your business, and the employee. The agreement also serves as the foundational building brick that clearly establishes the employee rights and responsibilities, as well as your obligations as the business owner. A well written employee contract clarifies the expectations of both parties to the contract.  

A Good Employee Contract Should Include The Basics

  • Wages – salary agreement, pay dates, and commission terms
  • Bonuses – whether they are discretionary or contingent
  • Other Benefits – vacation days, holidays, health insurance, other benefits unique to your business.
  • Termination basis – these terms should be addressed based on the state in which your business is located.
  • Best Efforts Clause – the employee commits to providing their best efforts at work.

An Excellent Employee Contract Will Include The Essentials

Ideally, your business employment contract will cover the following legal topics as well to ensure employer and employee understand the priority to protect work product, and confidentiality expectations.

  • Intellectual Property Protection
  • Non-Compete Agreement
  • Confidentiality Protection of business knowledge
  • Choice of Governing Law
  • Dispute Resolution Agreement

Creating the right employee agreement for your business can be complex depending on the type of business you operate. Consulting a small business law firm can provide you with the information you need to provide a legal framework for your company as it grows. Call Behrends Legal today for a consultation!

Phone: 970-578-9455

Email: office@behrendslegal.com

Small Business Series #2: Licensing

SETTING YOUR BUSINESS ON THE PATH TO SUCCESS

Moving a small business from the initial planning stage to the opening stage involves a checklist of items to be completed before hanging the open sign in the window, so to speak. Licensing is one of the key pieces to a successful business launch that should not be overlooked. Businesses lacking the correct licensing to operate, can face serious legal and financial implications.

Speaking to a small business lawyer can help you determine which licenses you need to operate your business, and ensure that you are ready to open your doors as planned.

WHAT KIND OF LICENSE DO I NEED TO OPEN FOR BUSINESS?

The type of business you operate determines the licenses you need to be compliant with the law. You may need to comply with federal, state, and local licensing laws.

Here are a few of the most common licenses that are required:

Operating license: applications are approved by designated boards who regulate specific business types.

Seller license: when selling or leasing tangible items.

Building permits: related directly to the building location and how it is used.

Professional license: such as for doctors, lawyers, daycare providers, chiropractors, and hairstylists.

Other licenses may be mandatory as well based on the type of business that is operating. New business owners should be aware of potential other licenses such as zoning and land permits, fire department permits, health licenses, and occasionally sign permits.  Federal licensing is required for businesses in fields such as agricultural, alcohol sales, aviation, and radio and television industries.

Businesses lacking the correct licensing to operate, can face serious legal and financial implications.

PLAN AHEAD

Obtaining a license can take time and research. Plan ahead to apply for the licenses you need for your business. Various licenses can be applied for and retrieved by submitting an application, yet others will require a visit and or inspection by local authorities before approval is granted. This can cause unplanned delays, and result in significant fees to the business owner if not planned for in advance.

Behrends Legal is here to support your small business! Call today for information 970-578-9455.

Small Business Series #1: The Foundation

You’ve decided to start a business – congratulations! As you bring your ideas to life, take steps to lay a strong foundation for your company. Intentionally tending to key tasks will set your business on a firm path as you prepare your business for growth.

YOUR BUSINESS NAME

As you consider various names for your company, invest research into whether other companies share the same or similar names. A strong, unique business name sets your business apart, and creates a commercial impression in the minds of the customers you are trying to reach. Even if you are not prepared to trademark your name at this time, research your local and community business names for similarities, and conduct a preliminary search on your Secretary of State website to find out whether the name you wish to use is available. Once you have committed to your business name, begin using it on your advertising, signage, printed materials, products, and online marketing. Begin building a strong reputation behind your business name, and hire a business law firm to file your trademark name registration as soon as possible.  

MAKE IT OFFICIAL

After selecting a business name, make your business formation official by electing your business tax structure and entity type. Some of the most significant steps to take at this stage include requesting an EIN, registration with the Secretary of State, and selecting the business entity type under which you will operate.

The entity structure you select depends on a number of factors including how many managers/owners there will be, decision-making procedures, and taxation preferences. Understanding the implications of the entity structure you select is vital as you establish your business, and can have significant consequences if the requirements of the structure you chose are not followed. The most common entity structures include Limited Liability Company, Sole Proprietor, Partnership, and Professional Corporation. Speaking with a small business lawyer can help you determine the best structure choice for your company.

SET THE WHEELS OF YOUR BUSINESS IN MOTION

Once you officially have your business structure in place, and have claimed your business name, create a plan that moves you towards opening day. Anticipate the initial expenses you will face and determine whether you can fund the initial costs, or will need financing. One of the most significant costs to new business owners is the investment in location. Your business space may include an office, warehouse, or storage. Do you need to rent space, obtain company transportation, hire staff, order inventory, or buy equipment? Identifying the tools you need for the day-to-day function of your business is essential to maintaining a realistic grasp of how quickly you can open, and whether you are more likely to need funding upfront, or need to consider financing before your business begins to produce profitable income.   

At Behrends Legal, we look forward to learning more about your business goals, and helping you create a plan to achieve them! Reach out today for your legal support needs. 970-578-9455.

This article is for the purpose of information only, and does not represent or create a client-attorney relationship. Please call Behrends Legal if you need legal advice for your business.