The new year brings exciting opportunities for small businesses and entrepreneurs. It is a great time to make goals, plan for the future, and increase the success of your business. The new year is also a perfect time to perform a legal review of your business. Performing a legal review not only helps protect your business, but can help it grow more profitable as well. Reviewing these four areas of your business can help you to grow and prosper in 2016.
1. Corporate formalities. Two months ago I wrote a longer post about following the necessary corporate formalities for your business entity (Click Here for Previous Blog Entry). While the other tips I’ll be providing herein are very important, following corporate formalities annually is essential. Hold your annual meeting; file your annual report; and make sure your corporate registration still contains correct and up-to-date information. If you fail to do this, you may soon find that your corporation or limited liability company has been administratively dissolved. Operating under a dissolved corporate entity can expose you to personal liability. Furthermore, if you entered into agreements (sales, service or vendor agreements, for example) while the corporation was dissolved, the agreements may not be binding on the other parties. Take the time to ensure that your corporate entity has followed its required formalities.
2. Review contracts. Chances are, your company has previously entered into contracts which are ongoing. Some of these may be contracts that comprise the essence of the company (e.g., your company is a cleaning contractor, and has numerous cleaning contracts). Also, there may be contracts with vendors that assist your company, such as supply companies, service providers, machinery leases, etc. All of these contracts should be reviewed on an annual basis. I’ve learned that while many of my clients know the basic terms of the contracts (i.e., how much they get paid or how much they must pay each month in a contract), other important details have slipped through the cracks and have been forgotten. For example, if you want to terminate a service provider, when can you terminate the contract? How much advance notice must you provide? Is there a limited window during which you can provide that notice? Often, service contracts provide an automatic renewal unless a notice of termination is given within a short time-frame right before the renewal date. Reviewing your company’s contracts on an annual basis will keep you up to date on important provisions regarding termination rights, price/cost increases, and any obligations that may change. Know your rights and obligations by reviewing your long-term contracts on an annual basis.
3. Review contract forms. Most small businesses have form contracts on which they rely periodically. These may be invoicing agreements, service agreements, and similar contracts that the company uses to conduct its day to day business. It’s a good idea to review these annually with legal counsel. Were there occasions this year in which a contract did not work the way it was supposed to? Perhaps a new issue arose which had never been covered by your current form contract. Review those contractual forms which are important to your business, and determine if they are good as-is, should be modified—or perhaps even completely overhauled. You can schedule a consultation with a business attorney who can help you review your standard contracts and, if necessary, improve them.
4. Succession and Estate Planning. Take the new year to look at the bigger picture as well. If you’re a small business owner or entrepreneur, what would happen to your business if you died, retired, or wanted to sell out? At a minimum, you should have estate plans put into place to provide for and protect your family in the event of your demise. But better still, you should try to put into place plans for your business (and its ability to provide for you and your family) to carry on even after you leave the business. Take the time to think long-term: how can you structure your business so that it provides for you and/or your family, even after you’re no longer involved in running it?
Use this new year as a springboard for business success. And take the time for a legal review of your business, so you can make 2016 a success!