by eclewis | Jan 23, 2013 | Business News
So far this month, we have gone over starting a business by yourself and with your significant other. This week, we are going to touch on starting a business with a partner (or partners). In many cases, people determine that they do not want to go into business by themselves and that their significant other, while a great match for a life partner, is a terrible match for a business partner. After coming to these realizations, the hunt begins for a great business partner.
In some cases, business partners enter the picture like many other people in your life – without trying to find someone that is a perfect match, it just happens. It may be that you have a business and hire someone that ends up a great match for becoming a partner. Or it may be that you have someone that you have met through work or other social circles that is a compliment to you and would work great as a business partner. In other cases, it may take more work. You may have to attend networking events or search someone out to find someone that will work as a partner.
When determining if someone is a good business partner (regardless of how you met them), you need to ask a lot of questions. Going into business with someone is like marrying someone – and many times there is a lot more emotional and financial entanglement between business partners then even spouses. With a business partner, your livelihood is going to depend on what they do in regards to the company that you jointly own. Depending on how the business is set up, many times financial decisions will need to be run by them and approved by them in many cases. You will want to know what the person brings to the table (both financially and skill-set wise). Questions such as how many hours does the person want to work, what are their long term goals, what are their short term goals, how to they work with customers, what are their business plans, what are their strengths and weaknesses, and how they deal with difficulties are just some of the things you want to know before you enter into business with someone.
Legally, when you go into business with someone you need contracts between the two of you. You want to decide prior to having issues how you are going to deal with them – and you want this in writing. If you have an LLC, this is accomplished through documents such as an Operating Agreement, Membership Agreements, and Buy Sell Agreements. If you have a corporation, you will have Bylaws and Shareholder agreements. Careful drafting of these documents is a must as just like marriages, many business marriages fall too.
Tax wise, if you are going into business with partners, a careful look at all of the partners’ financial lives is necessary. While an s-corporation may be best for one partner, it may be that a partnership (as far as taxes) is better for another partner. If it ends up that different tax structures are better for different individuals, then this will be one of the first decisions that the partners will need to make. It may even be that due to the partners that are going to be included in the ownership, certain tax entities are unavailable. Therefore, in addition to having an attorney help structure the business and write the business documents, discussions with the CPA should take place early on.
If you have any questions about going into business with a partner or partners, please call me, your Denver business lawyer, Elizabeth Lewis, at 720-258-6647 today!
by eclewis | Jan 16, 2013 | Business News
Last week we talked about going into business by yourself. However, many times starting a business by yourself is a lonely undertaking that you don’t want to do and finding a business partner can seem harder than finding a significant other. When looking for the perfect business partner, some people start to think that the person they have decided to share their (non-business) lives with would be the perfect match. What better person to go into business with than the person that you live with, possibly have children with, and want to spend the rest of your life with?
While sometimes this works, before going into business with your spouse, significant other, or life partner you really need to think about it. Relationships are stressful – adding on the dimension of being business partners in addition to life partners can make, or many times break, a relationship. You may have different ideas of the type of business to start, the way to run a business, or the way to handle the finances of a business. In addition, you have no separation between your personal life and your business life.
Legally, there can be additional issues to tackle. When setting up a business owned by a married couple, discussions need to take place about what will happen to the business if the couple gets divorced, how the business will be financed, and how the business will be treated for estate planning purposes. If there is another party also in the business, even more careful planning needs to take place to make sure the business isn’t disrupted if there is martial disharmony between two of the owners that will affect the other (non-married) owners.
Tax-wise, when a business is going to be owned by a married couple, there may be different options for the tax treatment of the business. For instance, the couple may decide only to have one owner and be treated as a sole proprietorship, may decide to be treated as a partnership, or may elect for c-corporation or s-corporation status (setting up the appropriate legal entity for the type of tax entity selected of course). Discussions with the couples’ CPA to determine what tax treatment is best for the business are essential and should include tax planning and estate planning discussions.
If the business is owned by a couple who is not legally married (even if the couple is engaged and planning on being married), then the business should be set up just as a business would be between two partners who were not romantically involved. With a legally married couple, should the couple decide that they no longer want to be involved with one another, typically the couple is headed to divorce which means the splitting of the assets would be handled during the divorce. However, if a couple is not married, then if the couple decides to separate, the assets would be divided as decided by contract or by a court. In most cases, it is easier to decide how you would want assets split when you are still friendly (i.e. when setting up the business), rather than waiting until you want nothing to do with the other person. In addition, non-married couples need to have estate planning done to ensure that the person they intend to get the business actually does as the default rules for non-married couples are different than married couples. Again, a discussion with a CPA is needed to determine the tax treatment of the entity also.
Putting the legal issues to the back burner, opening a business is stressful emotionally and financially. Having one person in a relationship become self-employed can put a strain on a relationship. Having both people in a relationship become self-employed at the same time can be devastating if the business is not financially successful. Many times, even if a couple both want to start a business, one may want to consider staying at a paying job until the business is up and running. These are things a couple will want to discuss to make sure they are really ready to take the plunge before they do it.
If you have any questions about starting a small business with your significant other, please feel free to call me, your Denver business lawyer, at 720-258-6647 today!
by eclewis | Jan 9, 2013 | Business News
As many people’s New Year’s Resolutions include not working in the same old job by the end of the year, this month we are talking about ownership of a business. This week we are going to discuss opening a business by yourself.
Possibly the easiest way to start a business is to open it by yourself. When you open a business by yourself, you do not need to worry about making sure that you get consensus for decisions, determine who is going to be responsible for what, or get extensive legal documents prepared (although you should still have some legal documents prepared). Even little things can become easier such as deciding what hours you want to be open if you are opening a retail store, which customer your want to take, or something as basic as what name you are going to use for your business.
While making decisions may become easier, many things may become more difficult though. When opening a business by yourself, you are solely responsible for its success. This means that you may have to work longer hours or come up with more money than you would have to if you had business partners. It also means that you may have a harder time finding someone to bounce ideas off of as those around you may not be as invested in your business as business partners would be.
Some of the rewards of opening your own business come as it is more successful. For example, if you open a business by yourself, you get to reap the rewards of the business as it becomes financially better off (minus whatever Uncle Sam takes from it). You also get to know that you built the business yourself without the help of others (or at least with less help from others than you may have had with business partners).
If you have any questions about going into business by yourself, it is always a good idea to talk to other individuals that have opened businesses similar to the one that you are looking to open. Asking questions such as, “Why did you start your business on your own (or with partners)?”, “If you had it to do over again, would you start the business by yourself?”, and “What was the hardest part of starting a business by yourself (or with partners)?” are good questions to start with. It may help you determine if you want to go into business by yourself or with others.
If you have any questions about starting your business – either on your own or with partners – make sure to call me, your Denver business lawyer, Elizabeth Lewis today at 720-258-6647.
by eclewis | Jan 3, 2013 | Business News
One of the most common reasons new clients come into my office after the New Year is because the person (or persons) want to start a business. After yet another year has gone by working as part of a big corporation, people start to reconsider their purpose in life. Some decide that rather than working another year under someone else that this is the year that they are going to start their own venture – the year that they are going to enter the ranks of America’s small business owner.
There are many steps to starting, and then running, a small business. Meeting with an attorney is only one step in many. Some of the other steps include (and not necessarily in this order): meeting with a CPA, meeting with a banker, creating a business plan, researching your competition, finding business space, and finding a business advisor. It also requires deep soul searching to make sure that your personality and being a small business owner can work together – most small business owners (and I bet almost all successful ones) end up working longer hours than they ever believed imaginable!
There are many earlier posts about the types of businesses that you can start (and as always, I recommend speaking with an attorney like myself prior to starting a business to make sure you start it right). Therefore, rather than talking LLC/corporations/partnerships/etc., this month, we are going to talk about the basics of how to decide who to go into business with. Next week we will start with the pros and cons of going into business by yourself. The following week, going into business with a spouse or significant other and then with partners. Finally, we will talk a little about going into business with friends and family.
I hope you have a great New Year’s and that you have come up with some great New Year’s Resolutions! If any of your resolutions include business needs, make sure to call me, your Denver business attorney, Elizabeth Lewis, today at 720-258-6647!
by eclewis | Dec 27, 2012 | Business News
This month’s blog series has been focusing on preparing for the upcoming New Year. The first week of December, we talked about business planning and last two weeks we have talked about real estate and equipment leases. For that last post in this series, we are going to talk about changing your company’s legal structure.
When we talk legal structure, we are talking about the way that your company is treated under the eyes of the law. There are four main legal structures in Colorado that companies are organized under: sole proprietorships, partnerships, LLCs, and corporations. There are several others but those are typically less common for companies (for example, non-profits and co-ops) so we aren’t to discuss those today.
Sole proprietorships are set up by default when someone goes into business by him or herself and doesn’t set up an LLC or corporation. In some cases, people set up sole proprietorships intentionally for a variety of reasons including ease of setup and small liability issues. Standard partnerships usually are setup for similar reasons – by default because two people start working in a business. Both entity types can be appropriate for some situations. However, the situations are few and far between so if you are set up this year as a sole proprietorship or partnership, you really should be speaking to a business attorney to see if this is the appropriate structure for your business.
The next two types of business structures are by far the most common: LLCs and corporations. If you are set up as an LLC, you may want to speak with you business lawyer and your business CPA to determine if this structure is correct – especially as many times LLCs are taxed as either sole proprietorships or partnerships. If it is determined that you should move to s-corporation or c-corporation or depending on if your business has changed since it was organized, your business attorney may advise that moving to a corporation is a good thing.
In most cases, if you are a corporation, you will not be thinking about changing entity types. However, with some of the new regulations under ObamaCare and depending on what happens with the tax changes and the fiscal cliff, you may want to have a discussion with your business lawyer and business CPA to see if for tax reasons an s-corp or c-corp is still appropriate.
As always, if you have any questions about your small business or need help with determining if you business structure is correct, please call me, your Denver small business lawyer, today at 720-258-6647.
by eclewis | Dec 18, 2012 | Business News
This month’s blog series has been focusing on preparing for the upcoming new year. The first week of December, we talked about business planning and last week was reviewing your real estate lease. This week we are going to stay on the topic of leases, but move to a different kind of lease – equipment leases. Not all business have equipment leases, but those that do (or those that are thinking of entering one) have special things that they need to consider.
We are going to focus on three areas: (1) reviewing your equipment lease, (2) preparing to enter into a new lease, and (3) checking the status of any UCC filings. Doing certain tasks related to each of these areas can help make sure that you are ready for a successful new year!
If you have current equipment leases, you want to review them at least annually. Most equipment leases have automatic renewal terms in them. These terms are many times not favorable to the small business owner. You may be paying high prices for outdated equipment. By finding out if the equipment lease automatically renews, you can negotiate a better contract prior to the renewal or cancel the automatic renewal and find another company to work with. For example, you may have leased a copier and have two year old technology now. However, you may be paying the same monthly price for renting the equipment next year that you paid two years ago. As the equipment is two years old, the price for renting it should be going down. By knowing that the equipment is set to automatically renew, you can contact the copier company and say either they need to lower the monthly payment or take your business elsewhere and have a fancy new copier this next year! In addition, if you have had problem with your equipment, you may want to see if the lease includes maintenance and, if it is set to renew, will it continue to include maintenance. Maintenance can be costly if you have to do it on your own – and if you are renting, you won’t have anything to show for the costly maintenance when you turn the equipment back in.
If you are looking to grow (or are going to be needing a new lease for equipment because you aren’t automatically renewing your old equipment), and you are going to need new equipment, you need to have your financials in order. If you are looking for lease or lease to buy expensive equipment, the leasing company may want to do a credit check first and/or see your financials. If you have prepared a business plan, you may be able to get the financials directly from it. If not, you should be preparing for your upcoming taxes and be able to have the financials ready to go from that. If you have been bad about your credit, now is a good time to start looking at it – and if you are a small business, you will need to look at both the company’s and possibly your own credit. Having good credit can get you better terms and may make the difference between getting a lease and not getting one.
Finally, if you have leased equipment in the past (and to be honest, even if you haven’t), it is a good idea to check online to see if there have been any UCC filings against you or your business. You can check with the Secretary of State’s Office online by searching for your business name and your name. UCC filings show if someone is claiming a lien on your property if you don’t make a payment for debts owned to them. While a UCC filing is fairly common, if you have old ones that haven’t been removed and the underlying debt has been paid, you will want to get those taken care of sooner rather than later. You can contact the credit company directly or work with a small business lawyer like myself to get the matter cleared up.
As always, if you have any questions about your small business or need help with equipment leases, please call me today at 720-258-6647.
