Home Business – The Good, The Bad, and The Possibilities

Home Business – The Good, The Bad, and The Possibilities

A recent blog post asked whether it was time for your home business to move out. This likely resonated with many small business owners who operate out of the home and who may be growing out of the home business model. So, what if you are not ready to plunge into Denver’s highly competitive commercial real estate market? What if you are uncertain about your business’s potential for profit vs. the added expenses of leasing or buying an office space or storefront? There are other hybrid options that can keep you running your business from home while leasing or sharing space for your growing needs without breaking the budget. This post will discuss the good, the bad, and the possibilities for your expanding home business. A small business attorney will help you decide what is right for you now and in the future.

Why Your Small Business Should Stay at Home

The perks of working out of the home are well known. Among the top advantages are versatility, flexible schedules, low overhead costs, and increased value of your home. If you have been successfully operating this way with little to no legal hiccups – permits, forms, insurance, licenses, etc. – then you truly are at home. Plus, if you are in the start-up years, this may be the most cost-effective way to work. Another very beneficial pro of working from home is less commute time, which translates into more revenue-producing time. According to a Forbes article, the flexibility of working from home allows you to scale up or down more quickly, hiring more or fewer people, or working longer or shorter hours to right-size your business operations. Furthermore, you are able to work as late into the night or as early in the morning as it suits your family and schedules. Other benefits include tax breaks, reduction in fixed costs, and the ability to test out products or services before investing heavily in commercial space. Your small business attorney will help you from choosing a legal structure to securing and registering domain names and trademarks.

When Your Small Business Needs to Break Free

It may suit your clientele fine to conduct coffee shop meetings, but this may change as your business grows. You may need larger, quieter, or more private venues for meetings and presentations. Work-life balance and the space you designate in your home for business may become more challenging as the demands of your growing business increase. Vendors may not be able to deliver large shipments to your small garage. Restrictions from zoning regulations can impede you from adding separate structures to your home and even from displaying signs or allowing employees and customers to park. The lack of a more professional business location may limit your credibility and customer base. A small business attorney will help with your home business transformation from deciding if it is time to expand beyond the home to changing the way you do business.

Where Else You Can Conduct Business

If the prospect of spending $25 per square foot for office space in Denver is out of the question, there are other possibilities. Whether you are a startup or an established home business, you can find less expensive alternatives to traditional office leases that fit your needs.

  • Temporary Office Spaces – These are spaces available just for those times when you need to meet clients face-to-face in a professional setting.
  • Coworking Spaces – These also allow you to rent space for a certain number of days each month and often offer conference rooms or even amenities like fitness center access and networking events and workshops.
  • Executive Suites – These are custom-built spaces that allow you to grow. Even a small space can give you access to amenities, such as shared conference rooms and break areas with other small business owners, a lobby, a receptionist, and in some locations, administrative help.

If you need help with your growing home business, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

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Commercial Real Estate: How to Buy Big When Your Business is Small

Commercial Real Estate: How to Buy Big When Your Business is Small

Small businesses come in many sizes, offer different goods and services, and operate out of all sorts of spaces. Some conduct business out of the home while others share rented office space or temporary locations. If you decide that you have outgrown your existing place and are looking for a bigger, more long-term solution, there are things to consider before buying commercial space. A small business attorney will help you with all of your real estate decisions from taxes and insurance to location and protection. This post will discuss how to determine if your small business is ready for the transition to commercial real estate and how to secure the financing you need to make the purchase.

Five Questions Before You Make a Real Estate Investment

What is commercial real estate?
Commercial real estate refers to buildings or land intended to generate a profit. It can be divided into several categories, including office buildings, industrial, retail, restaurant, multifamily, undeveloped land, and more. Each type of commercial property is subject to numerous laws – contract, insurance, disclosure, landlord/tenant, and others – as well as Colorado state zoning and land use regulations.

How long have you been in business?
You are a well-established business in your neighborhood or district, and you have no plans to leave the area. Perhaps the space you have been renting suits your business, or you have found a great location nearby. Buying seems like a good idea, but even if you have been in business for 10 years, lenders will want to see that you have been profitable for at least the past few years.

What are your future goals for the business?
Be sure to align your business plans with your location. If you overestimate how quickly your business will grow, you may find yourself with too much space and a hefty mortgage. If you underestimate the potential success of your business in its new location, you may be unable to make necessary renovations and outgrow the space too soon. These two scenarios could be a big problem if the real estate market is down compared to when you originally purchased the property.

Will you benefit tax-wise from commercial property ownership?
If you are a C corporation (C corp) with 40 owners, it may not make as much sense to own the real estate as it does for a mom-n-pop limited liability corporation (LLC) that will benefit more from ownership. Talk with your small business attorney to determine if your business structure is the right one, especially for tax purposes.

Should you change your business structure?
The structure of your business will not only affect your tax obligations and liability, but it may also affect your ability to secure financing. As a sole proprietor, you are responsible for all debts and obligations, which is a deterrent to some investors. With an LLC, there is no limit to the number of owners; whereas, an s corporation is limited to 100 owners. C corporations are attractive to venture capitalists because of the unlimited number of owners and because there is no income tax liability. There are several other options for small businesses to secure financing.

Five Ways to Buy Real Estate as a Small Business

Small Business Association (SBA) Loans
SBA loans come in two types – the 7 (a) and the CDC/504. The 7(a) is a 90% government guaranteed bank loan, and the CDC/504 is a 50% first loan from a back and a 40% second loan from the government. SBA loans offer fixed interest rates, small down payments, the ability to finance building improvements, and a variety of lending sources. However, there is a lot of paperwork, employment criteria, and strict onsite occupancy rules.

Bank Loans
These conventional loans are not as simple as they used to be. There are fewer commercial banks, and even those prefer SBA originated loans because the government backs a percentage of it. If you can afford a larger down payment and are in good standing with your bank, you may secure a loan with less underwriting criteria and more flexibility in repayment.

Seller Financing
This is a direct seller to buyer arrangement. When sellers own a building outright, they can offer better interest rates than other lenders. Seller loans are even more flexible because you are dealing with an individual. While they are not as common as they used to be, these loans often entail fewer fees and a lot less paperwork

Third-Party Financing
Much like seller financing, third-party financing does not come with as many stringent rules as bank loans. Although we do not all have a relative or close friend with a million dollars they would like to loan to our business, these loans can be made quickly without the same environmental or appraisal requirements other lenders would have. There are drawbacks, of course, as no one wants to drain their grandmother’s nest egg or have to endure a foreclosure experience with someone you know or love.

Purchasing the Building for Cash
Probably the most elusive way to buy today, paying for a property in cash is also the most simple. You could buy the property as a sole proprietor or LLC, the lease it to your company. If you can truly afford to do this, be sure you are not sinking 100% of your available cash into the real estate. One of the biggest benefits of this method is that you can charge your business rent, which puts cash back into your pocket.

When it is time to establish or expand your business by moving to a commercial space, your small business attorney will ensure you are prepared for the process in order to ease the transition and maximize the benefits.

If you need help with commercial real estate law, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

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Business Contracts: When there is a Breach

Business Contracts: When there is a Breach

Contracts govern nearly every aspect of your small business every day. You are likely to have numerous contracts with other businesses, vendors, contractors, customers, employees, and individuals. A breach of contract, which can be particularly damaging to a small business owner, is common in business. Breaches are typically followed by a host of problems and wasted resources, ending many business relationships. Whether you are a startup business, a well-established business, or need a specialty agreement, a small business attorney will ensure that you are protected before or after a breach has occurred. This post will discuss what constitutes a breach, how it affects your business, and what you can do about it.

When Is It a Breach of Contract?

Contracts can be quite complicated, and what seems like a breach may really be a misunderstanding. One of the most common errors made in contracts is not recognizing breaches or having a process in place for dealing with them. Delays and other unexpected events happen all the time, and breaches can occur when a party fails to perform or pay on time, a product is not delivered as specified, or someone does not uphold the terms of an agreement.

Your small business attorney can help you determine if a breach has occurred and what recourse you have.

Four Types of Breaches

  1. Minor – An example of a minor, or partial, breach is when someone fulfills an agreement, but it is not up to your standards.
  2. Anticipatory – This type of breach gives you the right to bring a lawsuit against the party before the actual breach has occurred. If you paid someone to fulfill a large project by June 1st, but it is May 31st and they have not begun, you may claim an anticipatory breach.
  3. Fundamental – In this type of breach, you may have entered into a lease agreement only to find out that, on moving day, the landlord rented your space to another business.
  4. Material – One of the most serious types of breaches, a material breach of contract is a failure to perform or complete one’s duties under the agreement. If you provide a service or product to someone who then fails to pay you, he or she has committed a material breach.

How Does a Breach Affect Your Small Business?

It is important to assess and respond promptly to a perceived breach of contract. Many breaches, especially material ones, can result in a negative economic impact on your business. If a vendor or supplier fails to deliver a product on time, the damages can be catastrophic. They may even lead to a breach on your part for failure to deliver down the supply chain. If you are a victim of non-payment, this could affect your ability to pay your bills or purchase inventory. A small business attorney will ensure you maintain valid records and represent you in the event that a contract has been broken or resulted in harm to your business.

What Should You Do About a Breach?

You may want to settle a breach as swiftly as possible with little to no interruption to your business operations, but it is paramount that your rights are upheld. In most cases, all parties would prefer to minimize the time and resources invested in a dispute. You might request that the offending party take corrective measures in order to be compliant. You may even collect monetary damages without having to go to court. But when you find there is no other way, there are legal remedies for a breach of contract.

Three Types of Remedies for a Contract Breach

  1. Damages – Payment of damages include compensatory, punitive, nominal, and liquidated damages.
  2. Specific Performance – A court-ordered performance of duty under the contract may be used when damages are inadequate.
  3. Cancellation and Restitution – A contract may be canceled by the non-offending party who may also sue for restitution.

If you need help with your business contracts, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

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Managing Employees and Keeping Good Records

Managing Employees and Keeping Good Records

Many small businesses thrive with a staff of one while others need dozens or even hundreds of employees to run smoothly. Regardless of how many people you employ, and whether or not you have a human resources department (which is likely you), it is important to follow labor and employment regulations and keep the same records for each employee. A Denver-based small business attorney will ensure you start off and stay compliant with all of the complex aspects of employment law from agreements and contracts to liability and workers’ compensation. This post will highlight what your employee files should and should not contain, so you are organized and protected in the face of an audit or lawsuit.

Hiring Employees and Obeying Employment Law

As a small business owner, your checklists never end. Hiring a new employee means yet another checklist: get an Employer ID Number (EIN), register for an unemployment account, sign up for workers’ compensation coverage, submit employment verification, classify workers properly, implement an employee handbook, display workplace posters, and so on. The various state and federal regulations can be dizzying, but once you have completed your new hire checklist, the next step is to maintain organized employee files.

Without certain documents on file, you are not only subject to costly audits and fines, but you are actually at risk of being shut down.

What Colorado Small Business Employee Files Should Contain

  • employment contracts, agreements, or acknowledgments between the employee and you
  • documentation related to employee performance, including commendations as well as disciplinary actions taken (this is particularly helpful when you are asked to give a reference for a former employee)
  • job description
  • application and resume
  • offer of employment
  • W-4 form
  • Colorado employee withholding allowance certificate
  • employee signature upon receipt of employee handbook
  • position/rate change forms
  • requests for time off
  • emergency contact and next of kin information
  • documents of any training programs completed by employee
  • warnings of poor attendance or frequent tardiness
  • documents relating to an employee leaving the company (exit interview or clear documentation of why an employee was terminated)

Maintaining certain records separate from employee files allows for appropriate access by managers, employees, and outside auditors while preventing people from having inappropriate access to other employee information.

What Employee Files Should Not Contain

  • documents or entries that do not relate to the employee’s job performance or qualifications (e.g. political views, private life, or criticisms involving race, gender, or religion)
  • medical records (if you employ someone with a disability, you are required by law to keep that employee’s medical records in a separate file with limited access)
  • Employment Eligibility Verification (Form I-9)
  • Equal Employment Opportunity (EEO) records
  • interview notes and employment test results
  • reference or background checks
  • drug test results
  • child support or garnishments
  • litigation documents
  • workers’ compensation claims
  • requests for employment or payroll verification

As a small business owner (and HR officer), it is your responsibility to provide your employees with a safe and healthy workplace, to comply with state and federal employment laws, and to maintain good records. Just as you keep track of your inventory or financial transactions, you should have complete records of all of your work with your employees. Your small business attorney will see to it that you are prepared and protected regardless of whether you are faced with an audit or lawsuit. Good records mean good business and peace of mind.

If you need help with employment law, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Business Lawyer. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

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Why Your Small Business is Just the Right Size

Why Your Small Business is Just the Right Size

Many business owners, who start small, dream of huge success and growth. However, higher profits and expansion do no mean the end of your small business status or the control you have over the product/service you set out to provide. With a broad definition and many variables, a small business may be classified as a company with under $7 million in sales and up to 500 or more employees. Basically, there is plenty of room to grow while remaining a small business. Choosing the best business structure is critical to the success of your small business regardless of your future goals. A small business attorney will help you with every aspect of your business formation and transformation. This post will discuss the benefits of being labeled “small” and review the most common types of business structure for small businesses.

3 Small Business Benefits

As a Small Business Owner, You Are in Good Company

According to the U.S. Census Bureau, there are nearly 30 million small businesses in America. In Colorado, small businesses make up 97 percent of all businesses. A Wall Street Journal article says “small business is big business,” citing that small business employs about half of the people in the workforce and accounts for 86 percent of companies with 500 or more employees. Technology has streamlined everything from bookkeeping and payroll to staffing and marketing, making it possible for small business owners to operate like big corporations. While hefty competition is viewed as a deterrent to some, others see marketplace opportunity and a culture of collaboration.

You Can Find Your Niche

The limitation in scope and reach for some small businesses lends itself to niche marketing. Your small business enables you to focus on a portion of the market that other businesses overlook. This gives you opportunities for specialization and integration into your community. As Denver has experienced an influx of migrating millennials, niche products and services are in demand more than ever. This is a generation that monitors and shares via social media on a daily basis and, in turn, shapes and influences where people shop, eat, and buy.

You are Creating Your Legacy

Perhaps this is why you started your small business – to not only provide for your family, but to leave something for them, whether it be the actual business or the values it embodied. Staying “small” can also afford you more time with the people who matter most and opportunities to engage with the community where you live and work.

Start your Small Business Right – Business Entity Formation

Each of the three most common business structures has its own characteristics and limitations, affecting your liability, taxes, and income. As these have been covered in previous blog posts, here is a brief review.

Sole Proprietorship

One of the most prevalent and simple business forms, a sole proprietorship is an unincorporated business owned by one person. This is an inexpensive and informal way to conduct a small business. A freelance photographer or someone who handcrafts jewelry, for example, would be considered sole proprietors. The main drawback is that you assume full personal liability for your business.

Partnership

When there are two or more partners who own the business, it is a partnership. This can be a husband and wife who share everything equally (general partnership), or it can be you and a friend who only contributes and receives partial profit (limited partnership). As with sole proprietorships, there is more flexibility and control than in a corporation as partners are able to define their relationship and roles. Partnerships, however, have more ability to raise capital than a proprietorship.

Corporation

A corporation is a legal entity that is independent of its owners and has its own legal rights. There are different types of corporations (C corp, S corp, B corp), and even a sole proprietor can incorporate. In a corporate limited liability, shareholders are only at risk for the amount of money or other investment they make in the corporation. Investors are willing to invest in a corporation more than any other type of business organization because of the ability to protect personal assets from the creditors of a corporation. There are restrictions associated with the different corporations, and not all small businesses qualify for each type.

Your Denver-based small business attorney will help you select the right structure for your small business today and ensure it is still working for you in the future. If you need help with your business formation, contact me, Elizabeth Lewis, at the Law Office of E.C. Lewis, P.C., home of your Denver Small Business Attorney. Phone: 720-258-6647. Email: elizabeth.lewis@eclewis.com

Contact Us Today

Law Office of E.C. Lewis, P.C.
Your Denver Business Attorney
501 S. Cherry St., Suite 1100
Denver, CO 80264
720-258-6647
Elizabeth.Lewis@eclewis.com

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