Entrepreneurs & Business Owners

Whether you are in the stressful but exciting stages of a new venture, or have already been established for a while, there are challenges that you, the business owner, have to navigate. Some common ones include the startup phase, succession planning, contracts, and risk management. A less common challenge, and one we hope you never have to endure as a business owner, is litigation over a dispute.

Startup Phase

The beginning phases of a business are exciting, but they can also be stressful, particularly when you are trying to turn a profit. One of the very first decisions you will face is entity selection, which is legalese for choosing and forming an LLC, an S or C corporation, a nonprofit, something else entirely, or perhaps nothing at all. When choosing an entity, you should ask whether partners or employees will be present, and what activities you will be involved in, among other questions. It is up to you to be a success, but thoughtful answers to these questions and others help. Setting your business up properly can save you from headache down the road.

Succession Planning

Although it is rarely too early to have a succession plan in place, you should have one if your business has been established for a while. If you pass away without a plan, your ownership may be passed to relatives, absorbed by partners, or some combination, depending on agreements in place. This can lead to hard feelings if not done correctly, as relatives and partners more involved in the company are likely to desire greater ownership. With no plan, it is also possible that there will not be sufficient resources, causing part or all of the business to be sold simply to facilitate the transition.

Understanding the goals of the company from your perspective, and also that of any partners and relatives, may help you address misunderstandings or disagreements about the future of the business in your absence while you are still in charge. Your plan may include buy-sell agreements with life insurance on the partners' lives in order to purchase the interest of the deceased partner, or provide needed cash flow for taxes and costs. It may also include ways to keep the business within your family while still properly compensating those with greater management responsibilities. The succession need not be difficult whenever that day comes if you have a plan.

Contracts & Negotiations

Merriam-Webster defines a contract as "a binding agreement between two or more persons or parties." While the legal understanding is more nuanced, the simple fact remains that in order to conduct virtually any form of business you must enter into contracts. A contract may be as simple as the sale of a $3 cup of coffee to a customer from your barista shop, or as complex as your acceptance of a contractor's $1M+ offer after filtering through 400 pages of their spec book proposal.

Whether you are drafting a contract for a customer or employee, or you are the one reviewing it for acceptance, knowing its consequences is key. What is the scope, nature and time frame of the work? Are there penalties for failing to perform on time, or perform at all? Is the contract compliant with the law? Are there any restrictive covenants? What notice, if any, must be given by either party to withdraw? As has often been said, "the devil is in the details."

Managing Risk & Liability

Potential pitfalls face the unwary business owner. Someone may try to screw you over on a deal or even try to sue you! Depending on the structure and nature of your business, risk management strategies may be appropriate to address your risks and exposures to liability. Avoidance of "piercing the corporate veil," understanding premises liability concepts and adjusting your habits, being compliant for your industry's standards, and consideration of an umbrella insurance policy to protect you and your assets are all potential strategies that can be used. With your business, an ounce of precaution is worth a pound of prevention.