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Becoming a small business owner is a big decision. People, for the most part, begin working on operating agreements and articles of incorporation, and then move on to working on the business to make it successful and profitable. Few, if any, ever work on their exit strategy for their business from its inception. Most only start to worry and think about their business exist strategy before its too late.
The reason why you should consider this early on is because you may need to plan and act differently depending on how you intend to proceed in the future. For example, if you desire the business to remain in the family after you retire or pass away, you will need to plan differently than if you intended to sell the business to the highest bidder to finance your retirement.
There are also different planning needed if the business is an “owner-dependent businesses.” Those include professional practices like accountants and/or doctors, contractors, and others. These individuals are faced with another type of situation because their businesses may not be financially viable after they decide to stop working, so special planning is needed in these situations.
Another consideration is if the business is a partnership. If you are a partner in a small business, you and your partner(s) must work together to devise a strategy that works for all the partners, and this often involves the execution of a buy-sell agreement.
Business planning is an important step in business formation, and seeking out legal help to make sure your are prepared to sell or pass on your business if the worst happens is very important. It is not as easy as simply stepping away when you decide to retire when you own a small business. Every situation is special and unique, and this is why personalized planning with the benefit of expert guidance is recommended.
To be sure that you are working within an informed framework that leads to the ideal exit, take action right now to set up an appointment to speak with an experienced and knowledgeable attorney who specializes in small business planning.
New businesses, or start-ups, often struggle later on its the business’s life due to how the business was originally set up or organized. This is more often a problem with businesses with more than one founder, since at one point or another, personalities and ideas will clash between the founders or later buy-ins. Too often, business co-founders will treat a new company like an exciting new relationship. The founders get excited about the new business, everyone seems to agree on everything, and then the business is founded without talking to an attorney, accountant, or any other business professional. The founders go out, start the business, and never discuss operating agreements, by-laws, or anything else that a professional would suggest. In the professional world, relationships that start in a frenzy, and without much consideration for the future, often end up in failure, and start-ups are no different.
First, before even consulting an attorney and/or accountant, it is very important for the co-founders to have a long and detailed conversations about their business, their working relationship, how to settle disputes in the future,and many other topics that they will have to deal with as the company grows.
One of the people who knows this best is Dharmesh Shah, the successful entrepreneur and co-founder of HubSpot. He recently published a list of the most important questions that co-founders need to resolve as soon as possible when starting a new business.
After you talk to the other founders of the business, it is time for the business owners to consult an attorney and/or CPA. Every business and business owner is different, so a meeting with an attorney is important to discuss how to organize your business to fit your business present and future needs.. If you are in the process of starting a business, or have recently started one one (or never got around to creating an operating agreement), please call our office today for a free consultation about the needs to organize your business.
If you are thinking about starting a business, these previous posts may interest you: