Need-To-Know Business Tips from a Local Lawyer
Our downtown business owners consider a lot in their shops’ setup, running, and sometimes closure. And, while they all do many things well, it’s impossible to have all the answers to the inevitable questions arising from owning a business.
Thankfully, we have fantastic resources in the same neighborhood as our downtown businesses, perfectly positioned to help them realize their dreams, provide counsel along the way, and support them should they need to plan an exit. Enter: Beresford Booth PLLC, a full-service law firm with deep Edmonds roots. This knowledgeable team has been in our town since 1946!
Beresford offers more than just business advice, which makes them uniquely qualified to talk you through everything from how to untangle business liability from personal property, things to consider should you need to transfer ownership, and if you consider buying the building where you’re currently leasing space.
Caleb J. Tingstad, one of the firm’s newest hires (who happened to spend his summer studying for the bar at Workhorse, about a block from Beresford!), tells us more.
Forming Your Business
Let’s say you have an idea for a very exciting downtown Edmonds business you know the city needs. While you’re brainstorming branding and offerings, you also have to select an entity.
According to Caleb, “There is no reason to be a sole proprietor—forming an LLC or a corporation is easy and provides personal liability protection.” Beresford prefers LLCs over creating a Corporation because LLCs are infinitely more flexible and require less paper to comply with corporate formalities. For example, Corporations require bylaws, shareholder agreements, yearly meeting minutes, the appointment of directors and officers, etc., but an LLC does not require any of that list.
You’ll also want to create Governing Documents. As Caleb told us, “Every single entity, whether it has one owner or multiple owners, needs a document to govern the parties’ relationship to the entity. Frequently, banks require governing documents before they will even issue a bank account. With LLCs, the governing document is an LLC agreement, which describes, among other things, the management of the LLC. Failure to have governing documents can result in the law disregarding the separateness between the individuals and the entity.” Not sure where to begin with Governing Documents? Contact your friendly local lawyers, and they’ll lead you in the right direction.
What about insurance? “Insurance is simply another aspect of protecting you and your company from liability,” Caleb said. “For companies with more than one owner, insurance can be used to protect the company if something bad should happen to one of the owners. Insurance can also be used to fund a buyout for companies with more than one owner.”
Growing Your Business
You’ve hit your stride, you’re in the black, and you’re ready to give yourself a little more room to breathe and maybe take back your personal life. It’s time to hire employees!
Here’s Caleb and his team’s advice on hiring and employment:
Companies should have employment agreements with employees that:
- Describe the employee’s scope of work
- Identify the employee’s compensation
- Prohibit employees from wrongfully using proprietary company information
- Prohibit employees from soliciting other employees to leave the company and (in some cases) from competing with the company after employment is terminated
Need to get some of those agreements in place? Put your employment ducks in a row before you hire. It’ll make everything a whole lot easier and your forthcoming beach vacations extra sunny.
As you continue to grow your company, you might also be ready to consider IP protection. Caleb notes: “One of the best ways to protect a company’s value is to register marks or procedures at the state or federal level. Companies frequently overlook logos and slogans, but it is easy to protect these things by obtaining a trademark.”
Want to grow even faster? It’s time to think about financing. “Additional capital is a necessary part of a company’s growth,” Caleb told us. “Many startups fail simply because they lack the necessary capital.” There are different ways to structure financing, which your lawyer can help you understand. You can choose loans or investment for equity. If you’re going the loan route, ensure you have a good relationship with local banks. We have several listed on our Financial & Banking page on edmondsdowntown.org.
Exiting Your Business
What if your relationship with your business has run its course for one reason or another, and it’s time to move on? Untangling yourself can feel cumbersome, which is where a great legal partner can really support you. Questions to ask yourself:
- Will the company be liquidated and dissolved?
- Will it be sold to a strategic competitor or private equity group?
- Will it be passed on to a family member or key employee?
Depending on your choice of exit, the company should be organized to accommodate what you choose for its future. “For example, it does not make any sense to want to pass a business on to a family member if the family member has no knowledge of, interaction with, or leadership role within the company,” Caleb advised.
This brings estate planning to mind. “Estate planning and advising small businesses go hand-in-hand,” Caleb said. “Frequently, small business owners have significant risk in their estate portfolio because most of their net worth is tied up in their small business. An exit from the company should be strategically structured to limit potential estate tax liability.”
The Best Part of Hiring A Lawyer To Help You Figure All of This Out
Our local lawyers have strong community ties and connections with people in all the industries mentioned in this article: Financial advisors, business sale brokers, banks, and more. So many questions can be answered by putting together the right team.
A big thank you to Caleb for all this guidance and knowledge on business law. Learn a few new things like we did? Tell us! We’ll be posting on Instagram and Facebook about this article, and we’d love to hear from you. Comment with your favorite takeaway so we can know what helped you the most.
By Whitney Popa, Photos by Matt Hulbert