By: Michael R. Demerath, Attorney at Hager, Dewick & Zuengler, S.C.
At the beginning of each year we all take time to reflect on the year that was and what this year can bring. As a part of this reflection, we often come up with New Year’s Resolutions for ourselves, whether it is to lose weight, spend more time with family or finally take that dream trip. The start of a new year is also the perfect time to put in place a set of resolutions for your business. Below are some ideas which you may want to consider as a part of creating your business New Year’s Resolutions.
Entity Formation
Your business may have started as a hobby and, therefore, you are doing business as a sole proprietor under your own name or a trade name. Hopefully over the past year sales have started to grow, and this hobby is now or will become a significant source of income and possibly your full-time job. 2017 may be the time to transition from a sole proprietorship to a limited liability company (LLC). A LLC can reduce the risk of you being personally liable and losing personal property and funds for liabilities of the business. It will also allow for a clear separation of business income and expenses from your personal income and expenses. This will help you create clear budgeting and income projections.
Succession/Exit Planning
As you spent the holidays with children and grandchildren, spending more time with family may be one of your individual resolutions, and a path to fulfill that resolution may be to begin to transfer or completely exit your business. As the owner of a business, succession or exit planning needs to start months, if not years, in advance. The first step is to get a team of advisors (lawyers, accountants and brokers) in place to help review your contracts and accounting in preparation of a transfer of ownership. Are the contracts with your vendors and customers assignable? Do your financial statements include the appropriate information and the detail the bank of a potential buyer might need? These advisors can also help determine if a sale to a third party makes sense or if there is an employee or child that is suited to take over the business. How do you get that individual committed? Should the transfer occur over the course of years or should the transition happen immediately with the assistance of seller financing?
Expansion
As you look to grow your business, maybe 2017 is the year to purchase an existing business. Purchasing an existing business could immediately expand your geographic reach, increase volume and decrease costs. As with succession planning, it is also important to get your team of advisors in place to guide you through a possible expansion. Do your advisors know of an acquisition target which would enhance or compliment your current business offerings? Is the business in a financial position to make the acquisition without becoming overleveraged?
Non-Compete and Confidentiality Agreements
Is 2017 the year to finally get those Non-Compete and Confidentiality Agreements in place to protect your business? You have worked hard to develop your customer and vendor relationships and the confidential information that makes your business successful. It is important that you look to protect your efforts in the event a key employee would leave your business to go to a competitor or start a competing business. When events like these occur, having Non-Compete and Confidentiality Agreements in place is vital. Many people are under the mistaken perception that such Agreements can only be signed at the beginning of the employment relationship in order to be enforceable. Please note that pursuant to a recent Court decision, continued employment is valid consideration to make a Non-Compete and Confidentiality Agreement enforceable.
Employee Handbooks
Each year your Employee Handbook should be reviewed to make sure it complies with current state and federal laws. An Employee Handbook can set forth basic policies and guidelines as to the expectations you have for your employees, as well as basic information related to benefits the business offers. Do you have cellphone and email use policies? Is it time to add information regarding continuing education tuition reimbursement upon the employee achieving a certain grade or staying with the business for a certain amount of time?
As you are setting individual resolutions for 2017, also take the time to set some for your business. Then when 2017 comes to a close, you can look back and hopefully see that you have accomplished your resolutions and your business is more successful than ever.