But just because you don't have the budget of a big business, doesn't mean you don't have the same challenges or need the same level of support that large companies enjoy.

In-house business lawyers are responsible for proactively seeking opportunities for their company, identifying potential risks, and helping to create a strong legal framework for the company’s success.

They have a deep understanding of the company's values, goals, and desires and are able to use that knowledge to counsel a business’s leaders in strategic decision-making.

But most small businesses don’t need a full-time lawyer on their payroll, and usually can’t afford one. Instead, they’ll often hire local business attorneys to help create contracts or review agreements for their company on an as-needed basis. Or they may even just wait until there is a problem, and try to find good counsel reactively instead of proactively.

The problem with this approach is that most business lawyers handling one-off transactions will charge a low flat fee per transaction, but never really get to know your business and will not review your contracts or help you make decisions strategically. Or, if you hire lawyers when a problem happens, you’ll be paying a big retainer and then unpredictable hourly fees that can interrupt or even significantly harm your company’s cash flow. Worse yet, they likely don’t know your company well enough to help efficiently.

While these are all important components of keeping your business running efficiently and profitably, I want to take this week’s blog to focus on something equally, if not more, important for your business - your legacy as a leader of your business. 

While building a legacy for you and your business sounds like something that has more to do with what happens way off in the future, the key to establishing a legacy worth passing on is to start now, today. It starts with building a values-driven business and leading your business with heart.

This may all sound abstract and touchy-feely, but there is a strong business case for building a legacy of heart-centered leadership that positively impacts your bottom line. If you’re unsure where to start, I suggest looking beyond your personal experiences and putting yourself in the shoes of the people most impacted by your leadership and business; your employees and customers.

From a creative side hustle to a tech startup, owning a business always comes with some level of financial investment and risk, whether you’re purchasing supplies, leasing office space, or hiring help.

Without the proper protections in place, any debts, lawsuits, or liabilities your business incurs could be leveraged against your family’s personal assets. And with fifty-five percent of businesses not surviving more than five years, having that protection in place is essential. 

Even if you have a strong business plan or an established clientele, life’s unpredictabilities can make it difficult or even impossible to take care of financial or legal obligations. Machinery needs replacing, business ebbs and flows, and contracts don’t go as agreed.  And while every business needs to invest money in order to grow, those investments can reflect poorly on your personal credit report if you’re a Sole Proprietor, affecting your ability to apply for personal loans or credit cards. 

By restructuring your business as a Limited Liability Company (LLC), you create a legal barrier between your business and your personal assets. This means that your personal finances, such as your home, car, and savings account, will be protected from any debts and liabilities incurred by your business. For example, if your business takes out a loan to rent a storefront, you won’t be personally liable to pay it back if the business defaults on the loan.

Wondering what the process to create an LLC looks like? Read below to learn the necessary steps, then contact us, your Personal Family Lawyer®, to help you create an LLC for your business with your state’s specific rules and regulations so that you can focus on growing your business.

While it may not be the most exciting task, it's important to ensure accuracy to avoid costly mistakes that could hurt your business in the long run. As the person responsible for completing these tasks, it's important to recognize that you may not have the same level of accounting expertise as larger businesses that can afford to hire specialized professionals.

That's why it's crucial for you to educate yourself on the common bookkeeping mistakes that small business owners often make. By learning about these errors and taking proactive steps to avoid them, you can effectively manage your finances and set your business up for success.

NOT KEEPING LOW-VALUE RECEIPTS

According to Business.org, one common bookkeeping pitfall is not keeping low-value receipts. While the IRS may not necessarily need these receipts, they can be helpful if the business undergoes an audit. This is particularly important for you if you run a small business, as many claimed deductions are likely to be the total of several smaller purchases. As a small business owner, you may either keep physical copies of these receipts in one safe location or scan and upload the receipts to a preferred digital accounting software.

FAILING TO TRACK REIMBURSABLE EXPENSES

Failing to track your business’s reimbursable expenses can result in costly consequences. Your company may miss out on tax deductions and pay more in taxes. To prevent this mistake, consider using expense-tracking software and recording expenses as soon as the business accrues them.

INCORRECTLY CLASSIFYING EMPLOYEES

If you hire various professionals, such as employees, consultants, contractors, or freelancers. you must correctly identify your employees, but classifying these professional can get confusing. Incorrectly classifying employees and contract workers may lead to severe negative consequences, including lawsuits and tax penalties.

But the reality is considering what would happen to your business in the event of your incapacity or when you die is one of your most pressing responsibilities as a business owner.

Although estate planning and business planning may seem like separate tasks, they’re inexorably linked. And given that your business is likely your family’s most valuable asset, estate planning is crucial for your company’s continued success and your loved one’s future well-being.

With a proper estate plan, your team, clients, and family could avoid dire consequences if something should happen to you. Yet these dangers can be easily mitigated using a few basic estate planning strategies. To demonstrate why proper estate planning is so important for business owners, here are four issues your company and family are likely to encounter as a result of poor estate planning, along with the corresponding estate planning solutions you can use to prevent and mitigate those issues.   

Many business owners hire accountants to create these documents. Still, it can be beneficial for these individuals to learn how to do this themselves, as this can help them reduce their costs and gain a greater understanding of their businesses. For business owners to create these documents, knowing the differences between them is essential.

WHAT IS A CASH FLOW STATEMENT?

According to Harvard Business School, cash flow is the difference between a business’s incoming and outgoing cash during a specific period. Cash flow statements enable business owners to review their business’s finances to determine its cash flow. In these statements, business owners can identify the business’s payments and expenses to determine where its money comes from and how it spends it. One of the key benefits of producing a cash flow statement is that it enables business owners to identify the amount of money required to run their business’s daily operations, enabling them to reinvest any remaining cash into their businesses to improve their long-term performance.

It also allows business owners to see if they improved their cash levels or decreased during a specific period. Usually, businesses create these documents quarterly but depending on their preference, businesses may make them more or less frequently than this.

Additionally, they outline what customers can do if they have an issue with the product or service, including how they can complain.

Businesses typically use client contracts to ensure their customers remain satisfied while also protecting the business’s interests. Understanding the essentials to include in a client contract can help business owners achieve this and develop clear, binding agreements.

CLIENT AND COMPANY DETAILS

Client contracts typically begin by outlining the parties involved in the agreement. This involves clearly stating the full name of the business, the business address, and any other names associated with the company. Alongside this, it is necessary to mention who the customer is by stating their full name on critical documents, such as passports and driving licenses. It is essential to avoid referring to the customer by any nicknames or other handles.

PROJECT SCOPE AND TERMS

If the contract involves services, outline the exact scope and purpose of the service. When doing this, avoid jargon and technical terms. Remember that a client contract can be binding without the need for this language. The critical thing is to include as many details as possible about the service and to be clear about what the company is going to provide and for how much.

SERVICES OR GOODS DESCRIPTION

Another essential thing to include in a client contract is a detailed description of all the goods and services the company intends to provide to the customer for which they have paid. If the client agreement involves services, it is an excellent idea to itemize these and present them as a list. For instance, freelance graphic designers may offer various services as part of a single package. Doing this is key in clarifying what the customer can expect. Moreover, it helps set limitations for the business concerning what they need to provide. In contrast, if the contract involves goods, simply mention what the business sells.

Even if you are just starting, beginning with the end in mind will set your business up for a lifetime of success and leave your heirs, clients or customers, and team with a valuable asset when you are gone. 

Perhaps surprisingly, properly planning for what would happen to your business upon your death or incapacity is one of the most important things you can do for your company’s growth and success, now and in the future.

By structuring your business affairs with the end in mind, you will naturally make better choices for everything from entity type to hiring and training to pricing and delivery of your services and products. 

Using a few basic estate planning strategies to make sure your business survives your incapacity or death can also set your business up for success from the start. Although you should consult with us, as your Personal Family Lawyer® with family business planning focus, to take you through our unique planning process and determine the specific planning vehicles that are right for your particular business and family situation, the following estate planning tools are essential for nearly all business owners.

Unfortunately, most business owners aren’t fully aware of all the potential risks that can affect their company or the options they have available to protect their personal assets from the risks of doing business. This is where asset protection planning comes in.

Asset protection planning is designed to reduce or eliminate the risks of being in business by shielding your business and personal assets from lawsuits, creditors, and other potential threats to the fullest extent legally possible.

And it’s absolutely crucial to have your asset protection strategies in place from the moment you open your doors, because once a claim or lawsuit is filed, it’s too late. In fact, if you take certain actions to protect your assets after a claim or lawsuit has been filed, you could be charged with fraud. With this in mind, the time to take action is now, while there is nothing to worry about and the full range of options to protect your assets are still available to you.

While the specific protections you require will largely depend on the specifics of your business and your personal assets, the following four vehicles form the foundation of most business owners’ asset-protection planning.

Corporations and LLCs exist as separate legal entities from their owners, allowing the business to acquire assets, enter into contracts, and take on debt.

In turn, if your business cannot pay its debts, creditors can go after your company’s assets, not your personal ones.

However, there are several circumstances in which a business owner can be held personally liable for the debts of a business, and you need to understand how these potential pitfalls can leave you at risk and vulnerable.

Sometimes, business owners make innocent mistakes when running their businesses, leaving them personally liable. Other times, when business owners take specific improper actions, such as using the corporation to promote fraud, failing to observe corporate formalities, or even just inadvertently commingling business and personal assets, a court can hold the owners personally liable for the debts and liabilities of the business. When this happens, it’s known as “piercing the corporate veil” to reach the personal assets of the owners of a business.

If you’re thinking of incorporating your business or already own a corporation or LLC, you should become familiar with the following scenarios that can leave you personally on the hook for your business liabilities.