Starting a new business can be an exciting adventure, but if formation of the business is not handled properly, it can fail just as quickly as it began.
In Colorado, the process of forming a business begins with selection of the best entity type, be it Sole Proprietorship, Limited Liability Company, Partnership, or Corporation. Depending on the type chosen, the owner(s) then need to register the company with the State of Colorado, obtain an appropriate tax identification number, establish internal operating documents, determine proper insurance and licensing, open bank accounts, begin the bookkeeping process, and then establish the company’s necessary operating contracts. All of this, taken together, is a substantial endeavor even for the experienced business professional.
If a business is not formed properly, or if any of the critical steps to protect it are missed, the owners may find themselves personally liable for any claims or litigation made against the business. Even worse, the business could find itself caught in an audit by the IRS, State of Colorado, or any licensing board that governs its operations. Fixing a problem caused by poor formation can cost several thousand dollars, and the business may never fully recover.
When a business is started on the best legal footing, the chances of problems, claims, and governmental audits are significantly minimized. You can ensure your business has the best chance of success by consulting with competent, experienced attorneys before you take the first step towards formation.
Partners, Investors, and Employees
Many people will choose to run their business as a solo operation, but growth can be a thrilling opportunity that sets a business up for long-term success. Whether bringing partners into the entity, finding investors to capitalize your growth, or even just hiring employees to assist you, there are many available options to move beyond a one-person operation.
When there are multiple owners to a business, whether as partners or investors, it is critical to outline and agree upon the operations of the business, including who manages day-to-day work, how major decisions are made, and how profits and losses are distributed between the owners. And most importantly, in the event an owner or investor becomes disabled, passes away, or even decides to leave the business voluntarily, the business should have a plan in place to transfer or buy out that owner’s interests. Without a plan, the business can fall into prolonged litigation, costing the owners and business thousands of dollars before a solution is reached.
Hiring employees is another great solution to the pangs of business growth, but employees carry their own unique set of challenges. Ensuring that you comply with state and federal labor laws, as well as protecting yourself from any future claims by the employee is paramount. An attorney well-versed in employment law can coach you in the best practices for hiring, maintaining, and even terminating employees.
Businesses of all kinds deal with contracts regularly, whether for vendors and service providers, use of contractors, sales to customers, leases for equipment and office space, and the purchase of commercial property. A contract may be hundreds of pages of legalese, or it may be a verbal agreement between friends. Regardless of how the agreement came about, it is important that the contract contains the necessary elements to make it enforceable, and that it adequately protects all parties.
Contract disputes can languish for years in the court system, and the dispute can cost much more than the contract was ever worth. Even worse, one party may find itself with no power because they did not fully understand the nature of what they signed. Contracts are instruments of negotiation, and in nearly every transaction, you can bargain the balance of power to protect yourself.
Whether you need a simple review of a contract, or you need an advocate to negotiate for you, or you are starting from the ground up and need a standard contract written for your business, it is invaluable to have an attorney on your side. Contract matters can be handled efficiently and for a fraction of the cost to litigate them on the back-end, so do not hesitate to consult with an attorney today.
Sales, Mergers, and Succession Planning
Eventually, all business ownerships will come to an end. Perhaps you choose to retire, and decide to pass your legacy down to your children. Or possibly you decide to sell the business, whether to a partner, employee, or even your competition. Or maybe, in that worst-case scenario, you experience an accident or illness that permanently forces you out.
In any event, there is a great deal involved in moving a business from one person to another. In an ideal situation, you will have planned for succession in advance, ensuring that the process and value for your business are determined long before any discussions are had. Even if you do not plan for the succession and transfer, though, you can still undertake selling, merging, or passing your business down to your beneficiaries with ease.
Regardless of how your place in your business comes to a close, it is important that the ownership interests are correctly valued, that the negotiations happen in a way that best protects your interests, and that the transaction closes on time and without conflict. An effective corporate attorney will compile a team of experienced financial professionals to assist in the process, and will ensure that you walk away from your business both compensated and confident about the future.