By M. Tyler Johnson
2020 was a year of change and challenges. Many small business owners are working harder than ever to keep their businesses running with fewer resources, changing supply chains, higher dependence on technology, and remote workers. As the year comes to a close, it’s time to plan for 2021 and beyond. Below are a few questions to consider discussing with your business attorney.
1. Should I incorporate?
Whether you are establishing a brand-new business or you are currently operating as a sole proprietor, one of the primary reasons to incorporate is personal asset protection. When you form
either a limited liability company or a corporation, you will enjoy limited liability, which means that subject to certain exceptions, your liability exposure is limited to the amounts you invested or
contributed into the business. In other words, you are not personally liable for the debts of the business.
There are several other reasons to consider incorporating. For instance, incorporating will give you the flexibility to designate how your business will be taxed. It can also help restrict or facilitate
the transfer of your ownership interest. Lastly, limited liability companies and corporations have perpetual existence, so what you build today can continue well into the future.
You should consult your attorney to determine whether incorporating is right for your business.
2. Do I have an exit strategy or succession plan in place?
As a business owner, you have probably put a significant amount of time and energy into growing your business. If you are approaching retirement, you should consider whether you
have a plan in place that will further your long-term goals. Important questions you will have to answer in your succession plan are: (i) whether you will be selling the business or passing it on to your children, (ii) how to value your business, (iii) whether you will need additional income after transferring your business, (iv) the tax consequences of a transfer, and (v) how you will prepare future management to succeed.
Developing and implementing a succession plan that properly addresses these issues is a process that will take several steps to complete. To prepare, you should review the business’s organizational and governance documents, if any, to gain an understanding of your business’s structure. You should also look into whether the organizational and governance documents contain provision relating to the transferability of your ownership interest. If your business does not have organizational or governance documents in place or the documents do not contain provisions relating to the transferability of your ownership interest, your ownership interest will pass through your estate plan. Therefore, you should also review your estate planning documents.
Developing and implementing a plan takes time. There is no better time to start than now.
3. Do I need to update any legal agreements to which my business is a party?
As we approach the new year, now is the time to take an inventory of all the outstanding contracts to which your business is a party. Some contracts, such as leases or vendor contracts, are renewed on an annual basis. These contracts should contain instructions on how to notify the other party of your intention to terminate or renew. Additionally, if you have not already done so, now is a good time to review your form contracts to determine whether they adequately address issues of non-performance, delays in performance, and termination rights in light of the COVID-19 pandemic. Given these uncertain times, you will want to make sure you are in the best possible position should you need to defend yourself or assert a claim that events related to the pandemic have hindered or prevented your performance under the agreement.
4. How do I develop and protect my brand?
Business owners spend a significant amount of time and expense building a name brand, logo, symbol, and slogan that are used to sell the business’s goods and services. These names, logos, symbols, and slogans communicate trustworthiness and a level of quality of the business’s goods or services to customers. Over time and through consistent use, a brand develops substantial and valuable goodwill in the marketplace. Thus, it is imperative that business owners understand how to protect their brand and the options they have for doing so.
Generally, the broadest scope of protection comes by way of registering the name, logo, symbol, or slogan that is used in connection with the business’s goods or services with the United States Patent & Trademark Office (USPTO) in the form of a trademark. Other options include registering the name, logo, symbol, or slogan with the State of Nebraska as either a trademark, service mark or trade name.
As a business owner, you have invested a lot in building your brand and should take steps to adequately protect your investment. Abrahams Kaslow and Cassman LLP is always here to help. Contact Tyler Johnson at 402.392.1250.