The business world is constantly changing, and only the most adaptable companies will survive. No matter what industry you’re in, or how large or small your business is, it’s essential to be prepared for the future long before it arrives. The goal is to anticipate the changes that will inevitably come. We advise our clients regularly about the steps that they should take to plan for the future of their businesses.
Review and update your existing contracts
As businesses change, so do their relationships with people inside and outside the company. If you already have contracts with employees, senior management, and third-party vendors, it may be time to review these agreements. What’s working, what isn’t working, and is there room for improvement? Are you getting the best value for the money? Are you wasting money on unnecessary expenses?
An attorney can review your existing contracts and identify areas that may require updating. If you don’t already have contracts in place for key business relationships, your lawyer can help you draft and execute them.
Consider changing business entities – or forming new ones
It’s a popular belief that once you select a business entity, you have to stick with it forever. But this isn’t true. You may consider changing what type of entity you have for such reasons as:
- Reducing your personal liability for business debts and losses
- Changing your individual tax burden as an owner or partner
- Attracting investors by adopting a more formal business structure
- Improving your ability to secure business loans
If you plan to expand your business into new geographical areas or industries, you may also wish to consider forming new legal entities. The purposes of these businesses may be outside of or different from your existing company. Businesses frequently form subsidiaries when they wish to do this. Another example is the creation of a holding company.
Revising your policies and procedures
Has it been a while since you updated your company’s policies and procedures? Or have you never formally adopted any? It’s time to take a look at the rules which govern your business. It may be necessary to update your policies and procedures to keep pace with changing laws or regulations. For example, there may be new anti-discrimination ordinances where your business operates that require revisions to your current policies. Changes to employee privacy laws may also necessitate a review.
Failing to make necessary changes will not only stymie your company’s readiness for the future. It could expose it to a lawsuit. But by working with a knowledgeable attorney, you can ensure your business keeps up.
Adopt buy-sell agreements
A buy-sell agreement helps your business work through transitions that inevitably occur when an owner dies, leaves the company, or becomes incapacitated. Without such an agreement in place, you could run into these and similar problems:
- An estate having the ability to sell the deceased owner’s interest
- A current owner being able to sell his or her interest to an outsider without approval of the other owners
- Disagreement on how to value a departing owner’s interest in the company
A well-drafted buy-sell agreement can avoid these issues and help your business prepare for the inevitable death, departure, and/or incapacity of its owners.
Create a business succession plan
Buy-sell agreements are often part of a broader business succession plan. Such a plan addresses questions like:
- Who will take over your business if you decide to leave, or you die or become incapacitated?
- Who will be in charge of the transition phase?
- What will the transition look like, and what will its likely results be?
Think of business succession as an estate plan for your company. A good plan will ensure that you have a say in who controls your business after you’re gone.
Being prepared for the future doesn’t just happen. It requires a proactive approach that takes your company’s values, objectives, and best interests into account. This is where having a business law attorney will make a significant difference.