Every business is different. Your business may start out as a part-time-in-the-garage venture or a sophisticated operation with multiple investors, or anything in between. But no matter where your business started or where it is today, there is always opportunity for growth and evolution, which can present any number of challenges. Here are some points to consider with your advisors as you move through phases of growth in your business:
Startup
Getting the right structure in place for your business from the very beginning can go a long way to making future expansion and transitions easier to handle. Work with a business attorney to adopt governing documents for your business, such as an operating agreement, bylaws, or buy–sell agreement. Set up a bank account that will be used solely for business purposes and make sure that all business transactions flow through that account. And establish your team early: Getting business attorneys, employment attorneys, accountants, and business advisors involved early in your business helps make sure that the decisions you make today are going to be effective for you tomorrow.
Business Expansion
As your business grows, it is important to continually review what rights and obligations the business has with respect to its customers and business partners. As you take on more business, you should evaluate whether you need to generate or update existing terms of sale/service. Or if you assist customers with an activity that may be dangerous, it may be time to update or adopt a new liability waiver. As your business grows in physical size, you should carefully consider what terms are put into a new commercial lease or real estate acquisition to give your business the flexibility to continue to evolve in the future. These are only a few of the many scenarios you may encounter. The important point is to connect with your advisors before making major decisions—it’s much easier to make a plan together in advance than to clean up unintended consequences after-the-fact.
Ownership Expansion
If your business brings in additional owners, it’s important to correctly document that transition and how it will affect business governance going forward. It should be clear who plays what role in the company and how those roles interact. This will likely mean reviewing the operating agreement or bylaws for your business and updating the buy–sell terms so that there is a clear mechanism to resolve any disputes in the future. With multiple owners of a business, it is inevitable that differences of opinion will occur, and having clear guiding rules helps to minimize the bumps in the road.
Employment Expansion
From the moment that you hire your first employee or independent contractor, there are employment laws to consider. Even if you only have a single employee, there are various rules that all employers must follow. And as your workforce and revenue grow, you may become subject to additional obligations that apply to larger employers. You may also find it useful to compile an employee handbook for your staff or prepare for how to handle any disciplinary actions necessary for your employees. To appropriately navigate these situations, it’s important to bring onto your team an attorney that is well versed in employment law to act as a resource for all of your Human Resources questions and requirements.
Business Succession
While much of owning and operating a small business is about the near- to mid-term, it’s also important to start thinking long-term, even early on. What happens when a key owner or employee suddenly leaves the business or has a short-term or long-term disability? Are there key employees that need to be elevated to more decision-making authority, so they are in a position to take over the business when the current owners retire? Are you looking at a sale of the business to a new owner or a larger corporation to transition out of ownership? There is any number of ways to structure all these types of succession plans, and the sooner you begin thinking about them, the smoother that transition can be.
For help navigating all of your challenges and opportunities as a business owner, reach out to the experienced business law and employment law teams at Blethen Berens.
