Small businesses require and deserve comprehensive and thoughtful legal counsel. In most cases, to be labeled as a small business according to the U.S. Small Business Administration (SBA), a company needs to be independently owned and have fewer than 500 employees. By this definition, most entrepreneurs will find themselves building an organization that will be labeled as a “small business” even at its peak.
Regardless of whether the goal is to build a team of 20 or 200, to craft each product by hand or scale operations to mass distribute across the region, to attract a team of diversified professionals or keep it all in the family – there are legal considerations to be taken at every stage of owning a small business.
For when you’re just getting off the ground …
- Understanding that Google can only do so much
When it comes to filing the papers necessary to register your business and secure new entity information such as a tax ID number, it can be tempting to Google your way through the process. Some people will choose online resources that claim to make the process simple for a small fee and while some users will find success with this approach, the vast majority will find themselves in need of legal counsel to undo a filling error or provide critical education and guidance in addition to the services they paid for virtually.
The value an attorney brings to the beginning stage of launching a business is much greater than the filing fee. It’s having someone in your corner to make sure you acquire the correct insurances, educating you about how your business will be taxed, and discussing your financial stability. Your attorney should ensure that your business is registered with the Department of State and other relevant state agencies and handle many other proactive steps so you can focus on what will make your business a success.
- Inviting everyone to the same table
The word collaboration means “the act of working with someone to produce or create something.” Morgan Cassel, an attorney who has been with Cherewka Law for almost 7 years, explains that, “What collaboration looks like in a practical sense is not only committing to getting everyone on the same page, but literally bringing all the key players into the same meeting space at the same time to work through fundamental issues and planning.”
Ideally, meetings should include your accountant, financial advisor, partner, family members, and any other stakeholders in your new business. By embracing a collaborative approach, small business owners benefit from everyone bringing their expertise and perspective which work together to create a strong foundation.
For when business is booming …
- Leveraging expertise without losing control
At some point in a small business owner’s career, it will be time to consider expanding ownership roles and potentially bringing on additional partners. This process can pose challenges. For instance, how do you gain the benefits of additional expertise without giving up too many rights. An attorney can help you find a way to incentivize your employees through profit sharing and/or restructuring the organization to allow for growth. Having well-documented expectations has an added benefit of contributing to better relationships among owners and key personnel.
- Making the leap from renter to landlord
Small Business owners might also need to consider whether it is in the business’s best interest to transition from renting their office space to owning property and buildings. Is it time to upgrade to a dedicated warehouse? Would being a commercial landlord be a worthwhile endeavor and bring in additional revenue streams? Would increasing square footage for a retail location align with strategic planning goals for the next 3, 5, 10 years? In addition to being one of the voices collaborating alongside your accountant and business partners, an attorney will be able to oversee any contracts and keep your legal best interests top of mind.
For when you’re ready to move on …
- Starting the conversation soon(er)
It is never too soon to ask yourself, “So… what happens next?” Depending on how a small business is structured, there may be a clear exit strategy in place for the current business owner and transition plan outlined for the next leadership team to execute. If there isn’t, conversations should be intentional and held often. Morgan stresses that business owners looking to pass their business down to the next generation within their family need to ask themselves, “Can they run this company? Do they have what it takes to successfully manage the business as it operates today and as it is set up to operate in the future?” Like anyone entering the Exit Planning process, it is critical to have the tough conversations sooner versus later so that personal expectations and long-term vision are aligned.
- Selling is not failing
For some owners, the plan is establish, build, and sell their business. This could mean being purchased by another owner, being absorbed into a larger organization, or liquidating assets. No matter the trajectory of your exit strategy, your attorney should be alongside you in every step to guide the discussions, sales process and ensure that you get fair market value for your company. Again, a lawyer who understands your long-term goals will create opportunities for you to maximize your return on investment and ensure that transition out of the business is just as exciting as the first day you opened the doors.
