9 Reasons Your Dental, Physical Therapy or Chiropractic Practice Needs a Small Business Lawyer
Key Takeaways: Hiring a business lawyer for dental, physical therapy and chiropractic practices helps protect your practice from costly mistakes, ensures compliance with Colorado healthcare and business laws, and supports long-term growth. From setting up your legal structure and drafting contracts to handling employment issues, lease negotiations, and risk management, a lawyer who understands the unique needs of medical practices can provide peace of mind and keep your focus on your patients.
Owning and running a dental, physical therapy, or chiropractic practice involves more than providing excellent patient care. You are also operating a small business in a heavily regulated industry. The business side of healthcare requires careful attention to contracts, compliance, employment matters, and risk management. Without proper legal guidance, even well-intentioned practice owners can face costly disputes or penalties.
This is where working with a small business lawyer who understands medical practices in Colorado makes a significant difference. A lawyer with this focus can serve as your trusted advisor, helping you make confident decisions and avoid preventable problems. Below, we’ll cover the most important reasons why your practice should have legal support in place.
Choosing the Right Business Structure
The way your practice is structured legally impacts taxes, liability, and growth potential. Many medical professionals start their practices as sole proprietorships or partnerships, only to later discover that they lack protection from personal liability.
A business lawyer can ensure you choose the business structure that is best for your specific situation. They will also make sure your structure complies with Colorado laws that apply specifically to healthcare providers.
Drafting and Reviewing Contracts
Contracts form the foundation of your practice. From employment agreements and vendor contracts to patient forms and equipment leases, every document should protect your interests.
Too often, healthcare providers sign contracts without fully understanding the legal implications. A small business lawyer for dental, physical therapy and chiropractic practices can review contracts created by other parties before you sign them and draft clear agreements on your behalf that prevent contract disputes. This is especially important in employment contracts where restrictive covenants, compensation structures, and termination clauses can have long-term effects on your practice. It is also important for medical equipment as for practices such as dental practices, that equipment may be extremely expensive and subject to non-standard equipment purchase agreements and/or leases.
Navigating Employment Law and HR Issues
Your staff plays a central role in the patient experience. But it’s important to remember that anytime you’re managing employees, it creates legal responsibilities. Wage laws, overtime rules, wrongful termination claims, and workplace policies all carry risks for practice owners.
A small business lawyer can help you create compliant employee handbooks, establish clear job agreements, and set policies that protect both you and your staff. When employment law issues arise, your lawyer can advise you on the proper steps to resolve them quickly and legally.
Lease Negotiations and Real Estate Agreements
Most practices operate out of leased office space, and commercial lease agreements are rarely straightforward. Landlords often use complex terms that can put tenants at a disadvantage. At some point in time, you may experience an issue that requires the assistant of a real estate law expert.
A small business lawyer can negotiate your lease to secure favorable terms on rent increases, maintenance responsibilities, and renewal options. They can also review agreements for new office space or expansions to ensure your long-term needs are covered. In a competitive commercial real estate market like Colorado, having a lawyer review your lease before signing can prevent expensive surprises later.
Regulatory Compliance for Medical Practices
Healthcare practices must comply with a wide range of state and federal regulations. Dental, physical therapy, and chiropractic practices all face unique requirements regarding patient privacy, billing, and record-keeping.
Even small violations can lead to serious consequences that may include hefty fines and damage to your reputation. A lawyer familiar with both small business law and healthcare regulations can help you set up compliance processes and keep them current as laws change.
Planning for Growth, Transitions and Exit Strategies
As your practice grows, you may consider adding partners, merging with another practice or even selling. Each of these transitions involves complex legal steps that directly affect your financial future.
A business lawyer can help draft buy-sell agreements, guide you through partnership negotiations, and prepare you for a smooth exit when the time is right. By planning ahead, you protect the value of the business you worked hard to build.
Risk Management and Liability Protection
Every medical practice faces the risk of disputes from patients, vendors, or employees. While professional liability insurance covers malpractice claims, it does not address many of the legal risks associated with running a business.
A small business lawyer can help you create policies, procedures and contracts that reduce the likelihood of disputes. If a dispute does arise, your lawyer will already know your practice and be ready to protect your interests.
Peace of Mind to Focus on Patient Care
Perhaps the greatest benefit of working with a lawyer is peace of mind. Running a dental, physical therapy or chiropractic practice comes with enough stress without worrying about legal missteps. Having a lawyer in your corner allows you to focus on what matters most – providing excellent care to your patients – while knowing your business’ important legal matters are handled properly.
Elizabeth Lewis Can Help
Elizabeth Lewis has been helping small businesses in the Denver area navigate complex legal challenges since 2007. She has experience working with a wide range of medical practices, including dental, physical therapy and chiropractic practices, and she understands the unique legal issues facing these businesses. This expertise can help you minimize the risk of costly legal problems down the road and in the event that one arises, she’ll make sure the best interests of your business are protected.
Elizabeth is committed to developing deep relationships with her clients. She understands that the when she knows the specific needs of your practice, she’ll be able to more effectively provide the legal guidance you need. This approach allows her to make customized legal recommendations that are specifically tailored to your practice.
Contact us today to schedule a consultation. The Law Office of E.C. Lewis serves clients in Denver and the surrounding areas.
Key Takeaways: Therapy practices face serious legal risks if compliance is overlooked. The most common issues include breaches of confidentiality and HIPAA privacy rules, improper therapist–patient boundaries, failures in informed consent and accurate documentation, and billing errors that may trigger audits, fines, or fraud claims. Partnering with a small business lawyer for medical practices helps therapists protect patient trust, maintain licensure, and avoid costly penalties while allowing you to keep your focus on quality patient care.
Therapists play an important role in the lives of their patients. As steward of your patients’ mental health, you must walk a delicate line between providing the help your patients need and adhering to the strict legal and ethical guidelines governing the industry. There are many potential legal issues which can impact your therapy practice, and the consequences for legal violations can be severe. Fines, license suspensions, costly medical malpractice lawsuits, and damage to your professional reputation can all potentially occur if you don’t have the proper legal guidance to navigate the varied requirements placed on therapists.
Confidentiality and privacy are critical components of the therapist/patient relationship. For patients to feel comfortable talking about highly personal information, they need to feel secure that this information will remain private and confidential. Therapists must adhere to confidentiality standards build into the American Psychological Association’s (APA) code of ethics, and they must also comply with HIPAA confidentiality regulations protecting the medical records and personal information of patients.
Confidentiality breaches can range from the improper sharing of client information to failing to secure patient health records. These violations can result in heavy fines and other penalties under HIPAA and state laws. To avoid these issues, therapists must use secure systems, train their staff on all state and federal confidentiality regulations, and obtain explicit client consent before disclosing any information.
Boundary Management Issues
As a therapist, you must maintain appropriate boundaries with your patients in order to preserve a professional relationship. When these boundaries aren’t upheld, it can potentially create a conflict of interest and impair your ability to provide the impartial treatment your clients require and deserve.
Therapists must establish clear boundaries with patients regarding:
Physical Contact – Engaging in a sexual relationship with a patient is never acceptable and can result in significant harm. It’s common for patients to regress, experience feelings of guilt or isolation, lose their ability to trust and be at an increased risk of suicide when they have a sexual relationship with their therapist. Sexual relationships with patients is never appropriate.
Dual Relationships – For the therapist/patient relationship to remain professional, it’s critical to avoid a dual relationship. Dual relationships can occur when a patient is your friend, family member or business partner. Therefore, it is not appropriate to treat people you have a pre-existing relationship with.
Personal Disclosure – While the relationship between a therapist and patient is intimate by nature, it’s important for therapists to avoid disclosing intimate details of their personal life, as this can constitute an ethical violation. As a professional, you should always maintain a boundary between your personal life and your patient’s.
Failing to maintain proper professional boundaries or abusing the therapist/patient dynamic can result in serious legal consequences such as medical malpractice lawsuits and potential license revocation. In some cases, it may even result in criminal charges.
Informed Consent and Documentation Issues
Informed consent is critical to ensure your patients have realistic expectations for their treatment. Some of the important informed consent topics you should discuss with your patients include:
Limits of confidentiality
Your expertise, training, and experience
Fees and billing practices
The specific services you can’t or won’t provide
The nature and extent of your record keeping
The patient’s right to terminate treatment and any resulting financial obligations
The length of time you believe the relationship will last
In addition, it’s important to adhere to best practices for documentation of patient care. This includes:
Providing documentation in a timely manner (within 24 hours of the therapy session)
Linking progress notes to the treatment plan
Including verbatim statements when relevant
Using objective, professional language
Avoiding copy/pasting prior notes
Failing to adhere to federal and Colorado-specific informed consent requirements or neglecting to maintain accurate records can potentially expose you to malpractice lawsuits and insurance audit failures.
Billing Accuracy Issues
Billing accuracy is critical when submitting claims to insurance companies for reimbursement, especially when working with Medicare or Medicaid. Improper billing, up-coding, or submitting claims for undocumented or non-rendered services is a violation of the False Claims Act, and it can result in audits, fines and, in some instances, criminal charges for fraud. To avoid these serious penalties, you must make sure your billing is accurate, services are justified and all claims are supported by proper documentation.
Elizabeth Lewis Can Help Your Therapy Practice Avoid Legal Issues
The best way to avoid the serious consequences associated with these common legal issues is to work with an experienced small business lawyer. At the Law Office of E.C. Lewis, we’ll make sure your practice remains protected.
Elizabeth Lewis is a small business lawyer for medical practices, mental health practices, and alternative health practices in the Denver area, and she regularly helps therapy practices remain compliant with all state and federal regulations. Elizabeth will provide the guidance you need to navigate the complex legal challenges impacting your practice. Her assistance may include reviewing your policies, providing ongoing compliance training and making sure you understand how to maintain proper patient documentation.
Contact us today to schedule a consultation. The Law Office of E.C. Lewis serves clients in Denver and the surrounding areas of Colorado.
Key takeaways: Starting a business in Denver offers exciting opportunities, but success depends on navigating critical legal considerations. From choosing the right entity structure and protecting intellectual property to ensuring compliance, drafting contracts, and securing investor-friendly funding, each decision shapes long-term growth. Addressing these issues early with the guidance of a startup business lawyer helps Colorado founders avoid costly pitfalls and build a strong foundation for success.
Denver provides an optimal environment for startup businesses to thrive. In recent years, the Denver/Boulder/Colorado Springs corridor has been dubbed “Silicon Mountain” due to the abundance of prominent tech startups in the region. While tech companies have been leading the charge for new business growth in the Denver area, startups in many other industries have been thriving in the business-friendly climate established by local and state laws.
Starting a new business in Denver can prove to be a highly lucrative and rewarding venture, but it also comes with a variety of legal challenges that must be navigated. Understanding the various legal considerations impacting your new startup, and taking the proper steps to address them, will play a significant role in your ability to make the leap from a fledgling business to a company that endures long-term success. Working with an experienced startup business lawyer will ensure each of these issues are handled properly, allowing you to avoid a variety of serious headaches down the road.
Choosing the Right Business Formation and Structure
Choosing the right business entity and structure will be one of the most important decisions you make with your startup. The structure you choose will impact taxation, your personal liability, fundraising opportunities, regulatory obligations, and the day-to-day operations of your business. Getting this decision right will ensure your business has the legal protections to support growth and minimize risks.
There are several ways you can structure your startup business:
Sole Proprietorship
Simplest structure, easy and inexpensive to set up
Full control for the owner
No liability protection – personal and business assets are legally the same
Best only for low-risk or short-term ventures due to personal liability exposure
No filing required with the Colorado Secretary of State unless operating under a trade name (“DBA”), which costs approximately $20 to register
Limited Liability Company (LLC)
Blends simplicity of sole proprietorship with liability protection
Flexible taxation – pass-through to personal returns or elect corporate taxation
Operating agreements allow broad control with fewer statutory requirements than corporations
Popular for startups seeking liability protection and management flexibility
Slightly higher costs and paperwork; some investors prefer C-corps
Requires filing Articles of Organization with the Colorado Secretary of State (approximately $50 fee)
Must maintain a registered agent with a Colorado physical address and file annual periodic reports to remain in good standing
Corporation (C-Corp or S-Corp)
Strongest liability protection for shareholders, directors, and officers
Eligible for Section 1202 Qualified Small Business Stock (C-corp)
Professional image, better suited to attract venture capital or angel investors
Disadvantages – more statutory formalities, regulatory requirements, and potential double taxation (C-corp)
Best for startups planning to scale rapidly or seek outside investment
Requires filing Articles of Incorporation with the Colorado Secretary of State (approximately $50 fee)
Corporations must adopt bylaws, hold shareholder and board meetings, and submit annual periodic reports
Key takeaway: An experienced startup business lawyer can guide you through the process to ensure you choose the right structure to balance your specific needs for liability protection, tax advantages and operational flexibility.
Legal Compliance and Risk Management
Your business will need to comply with a variety of laws and regulations governing your industry. These regulations can be extremely complex, blending federal and state laws with requirements from agencies that govern businesses in your industry. Maintaining compliance with these laws is critical to minimize risks to your business and avoid costly penalties.
Some of the compliance issues you may need to address include:
Key takeaway: An experienced small business lawyer can help you navigate all the laws and regulations governing your business.
Drafting Proper Contracts and Agreements
Drafting proper contracts and agreements is critical to the success of every startup business. They clearly define the terms of your relationships with partners, employees, customers and suppliers, and other third-party vendors. When contracts are constructed properly, they create clarity and accountability for the parties entering into the agreement, and they provide important legal protections for your business. On the other hand, poorly written contracts can lead to misunderstandings, disputes and costly legal battles.
Key takeaway: An experienced small business lawyer can draft, review and negotiate the contracts you enter into, ensuring they protect the interests of your new business.
Protecting Intellectual Property
Depending on the specific nature of your startup, your intellectual property may be one of your most valuable assets, and protecting your intellectual property is critical to your ability to maintain a competitive edge in your industry.
Some key areas of intellectual property you may need to consider as you start your business include:
Trademarks
Covers brand names, logos, slogans, and other business identifiers
Key takeaway: Intellectual property laws are highly complex, and a startup business lawyer can help you navigate the process by identifying your intellectual property assets, filing all necessary applications, and ensuring these assets are protected from infringement by competitors.
Funding Your Startup
Many startups need to secure funding to help get their business off the ground. There are a variety of potential ways you can finance your new business, and choosing the right funding structure is critical to ensure the long-term success of your company. When financing arrangements and investor agreements aren’t structured properly, it can result in a variety of issues, including investor disputes and diminished control over your company.
Securing funding for your new startup can be a complex process, and there are a variety of important considerations you’ll need to address to protect your interests during this process:
Valuation & Control
Secure a valuation that reflects growth potential to minimize founder dilution
Negotiate terms that preserve founder control over strategic decisions
Colorado startups often attract investors from Denver–Boulder VC hubs; founders should benchmark valuations against Front Range deal activity to avoid undervaluation
Investor Rights & Obligations
Define rights for board seats, voting, and information access
Clarify obligations for funding disbursements and follow-on investments
Early-stage funding in Colorado frequently involves convertible notes and SAFEs, so carefully review terms on conversion rights and equity impact
Exit Strategies
Plan for exits via acquisitions, mergers, or IPOs
Address liquidation preferences to balance founder and investor interests
Many Colorado startups exit via regional M&A rather than IPOs; understanding industry-specific local buyer trends (i.e., tech, energy, healthcare) is critical when drafting exit clauses
Key takeaway: An experienced startup business lawyer can help you negotiate investor agreements to ensure the terms protect your best interests and help you maintain control of the company. They can also assist with due diligence on investors to prevent working with someone who may present a conflict of interest.
Elizabeth Lewis Can Help
Receiving the proper legal advice when setting up a new business is critical to your long-term success. It will help you lay the foundation for a successful operation while avoiding many of the pitfalls that can potentially derail a startup in its early stages. At the Law Office of E.C. Lewis, we can help you navigate the important legal considerations that need to be addressed during this important formative stage of your new business.
Elizabeth Lewis is a small business lawyer who has been helping startups in Denver navigate the requirements of business formation since 2010. She understands the complex legal requirements associated with starting a business, and she can ensure these matters are handled correctly to provide your startup with the important protections it needs.
Contact us today to schedule a consultation. The Law Office of E.C. Lewis serves small businesses in Denver and throughout Colorado.
Key takeaways: Medical practices must balance exceptional patient care with strict compliance to federal and Colorado healthcare laws. Key legal issues include privacy and data protection, HIPAA enforcement, telehealth compliance, employment agreements, the Corporate Practice of Medicine doctrine, patient record-keeping, and medical malpractice.
While providing exceptional patient care is the primary responsibility of medical practices, it’s not the only concern they must address. There are many aspects to running a medical practice, and complying with legal regulations governing the healthcare industry must always be a point of emphasis. Doctors and practice managers must navigate a constantly shifting landscape of legal requirements that affect patient privacy, employment agreements, telehealth services, and the structure of the practice itself. In recent years, federal and Colorado laws have introduced new regulations that directly impact the ways medical practices must operate.
There are a wide range of legal issues that can impact your practice, and often these issues come with severe consequences that can potentially derail your business. The high stakes associated with these legal issues mean that it’s critical to work with an experienced business lawyer for medical practices who can help you navigate these issues.
The following overview will help you understand some of the most pressing legal issues impacting medical practices in Colorado. However, the best way to ensure your practice remains compliant with the latest laws and regulations is to consult with a business attorney who has extensive experience working with healthcare practices.
Colorado Privacy and Data Protection Laws
Patient privacy is one of the most pressing legal issues impacting healthcare practices. On the federal level, medical practices must comply with HIPAA’s requirements for safeguarding protected health information. But Colorado has also enacted state-level privacy rules that go beyond the regulations established by HIPAA:
The Colorado Privacy Act (CPA, effective July 2023) – Grants patients consumer data rights, including recognition of Universal Opt-Out Mechanisms (UOOMs) such as Global Privacy Control (GPC).
Breach Notification Law – Colorado requires notification of affected patients, and in some cases the Colorado Attorney General, following a data breach. This law applies to both medical and non-medical identifiers.
Key takeaway: Colorado practices must comply with HIPAA and CPA rules, honor GPC opt-outs, and follow strict breach notification deadlines.
Federal HIPAA Enforcement and Security Updates
HIPAA compliance was briefly mentioned above, but it deserves its own discussion. The Health Insurance Portability and Accountability Act (HIPAA) remains the foundation for protecting patient health data nationwide, and recent trends show stricter enforcement:
The Office for Civil Rights (OCR) has increased penalties for practices that fail to prevent ransomware or phishing breaches.
Proposed updates to HIPAA’s Security Rule would require:
Multi-factor authentication
Regular employee phishing training
Stronger encryption
Key takeaway: Federal regulators are expanding HIPAA enforcement, so practices should adopt multi-factor authentication, employee training, and encryption even before updates become law.
Colorado Telehealth Compliance Laws
Telehealth has become an important tool used by healthcare practices. Medical providers significantly expanded their use of telehealth services during the COVID-19 pandemic, and it has now become an essential component of the services many medical practices offer.
Telehealth services are subject to specific Colorado regulations:
Patient Consent – Providers must obtain and document patient consent (verbal or written) prior to delivering telehealth services. Written disclosures are required for initial visits, except in emergencies.
Standard of Care – Telehealth visits must meet the same standard of care as in-person visits.
Billing Compliance – Providers may only bill for services within their scope of practice.
HIPAA/Medicaid Rules – All record keeping requirements remain in place.
Licensure – Providers must be licensed in Colorado to deliver telehealth services to Colorado patients.
Key takeaway: Colorado telehealth rules require documented patient consent, equal standards of care, compliance with billing limits, and HIPAA-compliant recordkeeping.
Employment Agreements and Non-Compete Restrictions
Hiring and retaining physicians and healthcare staff is challenging, and Colorado law limits restrictive employment clauses:
Existing Colorado Law – Non-compete agreements for physicians are enforceable only in narrow situations, such as recovering certain damages.
Senate Bill 25-083 (effective August 2025) –Senate Bill 25-083 further limits non-compete clauses for physicians, advanced practice nurses, physician assistants and dentists.
Key takeaway: Colorado medical practices must revise employment contracts to comply with Senate Bill 25-083, which significantly restricts non-compete agreements for healthcare providers.
Colorado’s Corporate Practice of Medicine (CPOM) Doctrine
Colorado’s Corporate Practice of Medicine (CPOM) doctrine prohibits non-physicians from owning or controlling medical practices. This rule exists to ensure that medical judgement remains in the hands of licensed professionals and prevents conflicts of interest where financial or corporate motives might negatively impact patient care.
It’s critical to ensure your medical practice is structured in a way that adheres to the terms of the CPOM doctrine:
Rule – Only licensed physicians can control medical decisions.
Business Model Workaround – Many practices use a physician-owned professional corporation (PC) that partners with a management services organization (MSO) for administrative tasks.
Compliance requirement – Contracts must clearly separate clinical decision-making (physicians) from administrative functions (MSO).
Key takeaway: To comply with CPOM laws, Colorado medical practices must keep clinical control in physician hands and avoid agreements that let corporations influence medical decisions.
Colorado Medical Record-Keeping Laws
Colorado law establishes clear retention and custodianship rules for medical records:
Adult Patients – Records must be kept for at least seven years after the last treatment.
Minor Patients – Records must be kept until age 21, or seven years after the last treatment (whichever is later).
Custodianship Plan – Every medical practice must have a written plan for record access if the physician retires, closes, or sells the practice.
Key takeaway: Colorado requires strict medical record retention timelines and written custodianship plans to ensure patients can access records during practice transitions.
Medical Malpractice Liability
Medical malpractice remains a significant risk for healthcare providers. While most doctors are highly skilled and take the proper measures to ensure patients receive the best possible care, there are instances when mistakes are made. Even with malpractice insurance, these lawsuits can be costly, time-consuming and damaging to your practice’s reputation. In the event that you face a malpractice lawsuit, it’s critical to prepare for these claims with strong documentation, compliance and legal support.
Key takeaway: Malpractice lawsuits are costly and reputation-damaging, so Colorado practices must carry proper insurance and work with experienced legal counsel.
Legal Help for Your Medical Practice
Whether you’re currently facing a legal issue or simply want to ensure your practice is in compliance with the complex web of laws governing the healthcare industry in Colorado, working with an experienced business attorney is critical to the ongoing success of your medical practice. At the Law Office of E.C. Lewis, we can ensure your practice is protected from these legal issues.
Elizabeth Lewis is a Denver business lawyer who has helped many medical practices navigate the complex legal environment they face. Her extensive knowledge of the federal and state laws governing medical practices will help you address just about any legal challenge that may arise. Elizabeth believes in building strong relationships with her clients based on trust and transparency. She takes the time to learn about the specifics of your practice in order to provide customized legal recommendations based on your unique needs. This approach ensures your practice’s best interests will be protected at all times.
Contact us today to schedule a consultation. The Law Office of E.C. Lewis serves medical practices and med spas in Denver and throughout Colorado.
Legal Considerations When My Remote Employee Moves to Another State
As a small business owner, having a remote workforce provides a variety of benefits. It allows you to cast a wider net for job candidates so that you can secure the best possible talent for the unique needs of your business. You can also save a significant amount of money in monthly overhead expenses associated with maintaining an office. By offering your team a highly valued perk, it also gives you a competitive advantage when trying to retain your top employees long term.
If your entire remote team lives in the same state where you do business, employment considerations are relatively straightforward. But if you have a remote employee that relocates to another state, it can create a variety of complex legal, tax and compliance requirements to navigate. While these matters can prove challenging at first, they can easily be managed with the help of an experienced small business attorney.
As you begin planning for the legal matters that will arise when your employee moves out of state, it’s important to understand the critical laws and regulations that you’ll need to comply with. The following guide will help navigate the process.
Which State’s Laws Apply to Out-of-State Remote Employees?
In general, you’ll need to adhere to the laws of the state where your remote employee lives when complying with regulations associated with their employment. In some situations, there may be additional laws associated with the specific city where they reside which must be addressed as well. New York, Chicago, San Francisco and Seattle are examples of cities which have stringent regulations for their employees.
Before your employee moves out of state, you should research the employment laws governing the state where they will be living. This will help you understand the differences in the way matters such as payroll taxes, employment benefits and other items must be handled for this employee moving forward.
Business Registration and Insurance
When an employee relocates to another state, you will generally need to register your business with the new state’s revenue and unemployment agencies. As part of this process, you must determine whether you are considered to be “conducting business” in that state. This distinction varies based on:
The state your employee is living in
Their role in your company
The services they provide
If you’re considered to be “conducting business” in the new state, you’ll need to obtain a Certificate of Authority to Transact Business or the equivalent form in from the Secretary of State where your employee lives.
You’ll also need to register with your employee’s new state unemployment division and make sure the employee’s withholdings comply with their new state’s requirements. In addition, your workers’ compensation coverage for the employee must align with the minimum requirements of their new state. In some instances, this may require you to adjust your workers’ compensation insurance policy.
Tax Implications for Out-of-State Employees
You’ll need to withhold state income taxes based on the state where your employee lives and works. In many instances, income tax laws in the new state may be different than the laws governing the state where your business resides. If necessary, you may also need to register with the state’s tax authority.
Some states have reciprocity agreements. You’ll need to research whether these exist between your state and your employee’s new state of residence to avoid double taxation.
Compliance with Wage and Hour Laws
Wage and hour laws differ from state to state. You’ll need to comply with all minimum wage and overtime provisions associated with the laws in your employee’s new state of residence. You may also need to make adjustments to your payroll if laws governing pay frequency in the new state differ from the laws where your business resides.
Employee Benefits
Each state has different requirements for employee benefits, and you’ll need to review your existing benefits packages to ensure they meet the state requirements in your employee’s new place of residence. For example, some states require paid leave, sick leave and FMLA-type benefits that exceed federal guidelines.
In addition, you’ll need to make sure the health insurance packages you offer will adequately serve your employee in their new state. For example, if there are no (or insufficient) in-network providers on your existing plan in the employee’s new state, you may need to look into a plan that will allow your employee to find healthcare providers near their new home.
Additional Compliance Considerations to Monitor
The following items may have varying regulations from state to state, making it important to review the laws in your employee’s new state to ensure you’re in compliance:
Employee Handbooks – Your employee handbook plays an important role in ensuring your team understands company policies. You may need to update your handbook to reflect the legal requirements and employment policies that are applicable in your employee’s new state.
Recordkeeping and Reporting – Accurate recordkeeping is especially critical when you have employees living in multiple states. Make sure you keep detailed records of all tax filings, payroll and employee benefits. In addition, you’ll need to verify that you’re meeting the reporting requirements in your employee’s new state.
Employee Classification – Each state has slightly different employee classification criteria. It’s important to review the criteria in your employee’s new state to ensure they aren’t being misclassified as an independent contractor. Fines and penalties for employee misclassification can be costly.
Non-Compete and Other Restrictive Agreements – Each state has different laws governing non-compete agreements and other restrictive employment agreements. Make sure your existing agreements comply with the regulations governing these covenants in your employee’s new state and update their agreements if necessary to avoid compliance violations.
Elizabeth Lewis Can Help You Navigate these Legal Considerations
The legal considerations to navigate when a remote employee moves to another state can be overwhelming, and it’s often helpful to work with an experienced employment law attorney who can ensure you’re in compliance with all laws and regulations in your employee’s new state. At the Law Office of E.C. Lewis, we can make sure your business avoids the costly fines and penalties associated with noncompliance.
Elizabeth Lewis has been helping small and medium-sized businesses in Colorado navigate a variety of employment law issues since 2010. She understands the ways in which having a remote employee move out of state can impact your business, and she can help you navigate the complex process of making sure your policies comply with all the laws in the state and city where your employee now resides. This expert guidance will give you peace of mind that all necessary adjustments are made to your operations.
Contact us today to schedule a consultation. Elizabeth Lewis serves clients in Denver and throughout Colorado in addition to North Carolina.
Building a successful business is extremely hard work, but it’s also very rewarding. Seeing your fledgling small business blossom from a startup to a successful company makes the long hours you put in well worth the effort. But at some point, there may come a time when you decide running your business is no longer for you, and you may start looking into selling it. Regardless of your reasons for selling your business, it is one of the largest and most important transactions you’ll ever enter into in your life, and it’s important to put in the work to ensure you receive the proper compensation for all the years of hard work you’ve invested in building your company.
Selling a small business is a complex process that requires meticulous planning and a great deal of work to ensure the transaction goes smoothly and maximizes your return. On average, it takes roughly 10-12 months to complete the business sale process, and the preparation work should start way before this timeframe begins. It’s important to work with a small business lawyer who has extensive experience handling the sale of a business and can guide you through the process to ensure every step is handled properly.
Whenever you’re considering selling a business, it’s critical to understand the steps involved. The following guide will help you build a solid plan for preparing your business for sale.
Begin Preparing Well in Advance
The sale of a business can potentially take a long time, but the process starts long before you actually seek out potential buyers. The more time you give yourself to prepare for this important transaction, the more likely you are to achieve your desired outcome for the sale. Preparing well in advance gives you time to get a firm grasp on your business’ finances, identify ways to drive new revenue and optimize your profitability prior to the sale.
You’ll also need to assemble a team to assist with the sale (more on this later). It can take time to build the right team of advisors, and it’s important to start cultivating these relationships well before you intend to sell. Waiting too long to begin preparing your business for sale can complicate the process and make it challenging to attract the right buyer for your goals.
Define Your Goals and Timing
The first step of the planning process should focus on clarifying your goals for the sale and the ideal timing to sell. If you have partners, this process should be done collaboratively with all stakeholders in the business.
First, take some time to identify what you’d like to achieve from the sale of your business. Regardless of your reason for selling (retirement, lifestyle change, family or health reasons, etc.), understanding your goals for the process will ultimately play a critical role making the transaction successful. While every small business owner has a different set of goals and priorities for a sale, some of the most common include:
Maximizing the sale price
Safeguarding your employees
Ensuring a smooth transition
Having a quick and clean transaction
Achieving a favorable deal structure
Preserving the company’s reputation and brand image
When listing your goals, make sure to prioritize them. This can be a difficult task to work through, but it’s critical to identify what you consider most important. It’s often challenging to achieve all of your goals during the sale of a business, as the negotiation process will require give and take so that the buyer is able to achieve their goals as well. By outlining your priorities in advance, you’ll be able to focus on finding a buyer that allows you to achieve the goals that matter most to you.
You’ll also want to identify a timeline for your sale. You’ll have a much better chance of achieving your desired outcome if you sell at a time when your business is healthy, profits are robust and revenue is growing each year. These attributes will help you increase buyer interest and find the right fit to take over your business.
If your business is thriving and financials are all in good shape, you may be able to expedite your timeline if a quicker sale is a priority for you. However, if your business currently lacks strong financials and a vibrant customer base, you should establish a timeline that gives you an opportunity to improve the standing of your business before you sell it.
Assemble Your Team
The sale of a business is an extremely complex process that requires extensive expertise from a variety of professionals. You’ll need to hire a skilled team of advisors to assist as you prepare your business for sale. To ensure the smoothest and most successful transaction possible, you’ll want to assemble your team at the start of the process to ensure every phase is handled properly.
Your team should include:
Small Business Attorney – Your business lawyer will oversee all legal aspects of the deal. This includes drafting the sale agreement, navigating intellectual property issues, handling contract negotiations, and addressing all compliance and regulatory requirements.
Business Broker – Your business broker will be responsible for managing a variety of aspects associated with the transaction, including the business valuation, sourcing potential buyers, negotiating transaction terms and overseeing the sale process.
Tax Advisor – There are a variety of tax considerations associated with the sale of a business, making a tax advisor a critical component of your team. Your tax advisor will be able to help you structure the transaction in a way that minimizes your tax liability while ensuring the terms are acceptable to the buyer.
Accountant – Your accountant will prepare and review all financial statements, ensure your books are clean and ready for due diligence efforts and provide the financial transparency potential buyers will require.
Financial Advisor – The sale of a business typically generates a large sum of money for the seller. You’ll need a seasoned financial advisor who can assist with your personal financial planning after the sale is complete, ensuring your profits are invested wisely.
Get a Business Valuation
Before you can sell your business, you need to understand what it is worth. Getting a professional business valuation will help you determine the realistic value of your business, as well as its financial standing, market position, and tangible strengths and weaknesses. This information will help you set the proper asking price for your business and attract qualified buyers who can help you maximize your return.
Some of the factors used to determine the value of your business include:
Financial statements
Profit margins and revenue growth
Recent sales comps of similar companies
The value of tangible and intangible assets such as real estate, inventory, equipment, brand equity and intellectual property
Debts and liabilities
Clean Up Your Financials and Operations
Before talking to prospective buyers, you’ll need to make sure your financial information is properly organized and up to date. As a general rule, you should have at least three years’ worth of financial data for buyers to review. The more organized and detailed your financial statements are, the easier it will be for buyers to evaluate the financial health of your business.
You’ll want to make sure all financial records, including income statements, cash flow projections and balance sheets are accurate. Some of the documents you’ll want to prepare for buyers include:
Earnings before interest, taxes, depreciation and amortization (EBITDA)
Growth initiatives
Customer retention analytics
Balance sheets
During this process, your accounting team will help you identify potential questions that buyers may have regarding your company’s financial health and dig deeper into any potential issues that may be a cause for concern during the sales process. By taking the time to clean up your financials, you can create a compelling narrative about the numbers and position your business in the best possible light.
You’ll also need to clean up your operations to ensure they’re as streamlined as possible when buyers start looking into your business. This typically involves:
Identifying and addressing any inefficiencies, non-essential costs and outstanding liabilities
Documenting your core business processes in a clear, concise manner
Updating information about employees and their roles
Fixing or replacing any old or broken equipment
Making automation and scalability enhancements to your processes
Perform Legal and Compliance Reviews
Any potential buyer will want to perform some due diligence prior to purchasing your business. As the seller, it’s important for you to perform all necessary legal and compliance reviews and prepare these diligence documents for review. If any issues arise during the review process, you’ll need to resolve them prior to the sale.
Your small business attorney will help you perform all legal compliance reviews, including:
Reviewing all vendor contracts, customer contracts, license agreements and other contracts that might impact the sale
Ensuring all business permits and licenses are current
Making sure all intellectual property rights, including patents, trademarks and copyrights are documented and filed correctly
Drafting any nondisclosure agreements and noncompete agreements that may be needed as part of the sale
You’ll also need to work with your tax professional to ensure you’ve properly documented your tax status and are in compliance with all tax regulations. If there are any available tax incentives or outstanding tax liabilities associated with your business, you’ll need to provide these to prospective buyers as well.
Develop a Marketing Strategy and Search for Buyers
The final step in the process is to develop a marketing strategy that highlights the value your business brings, including its:
Growth potential
Unique strengths
Competitive position within your market
Create detailed marketing materials such as pitch decks, business prospectus and buyer packages. These materials should create a compelling narrative that makes your business attractive to buyers.
Next, begin reaching out to prospects who may be interested in buying your business. Often, it’s helpful to work with a business broker who can help you source potential buyers and handle the marketing process for you.
Elizabeth Lewis Can Help Sell Your Business
The complexities associated with selling a business make it critical to have the proper legal representation throughout the entire process. At the Law Office of E.C. Lewis, we have you covered.
Elizabeth Lewis is a small business lawyer with over 15 years of experience helping Colorado business owners sell their company. She can handle all legal aspects of the transaction, ensuring these important details are addressed properly. Elizabeth provides highly personalized representation and will make sure your rights and interests are protected throughout the sales process. Her keen eye for detail will ensure a thorough diligence process that identifies and resolves any potential compliance issues before they’re brought to the attention of a buyer.
Contact us today to schedule a consultation. Elizabeth Lewis serves business owners in Denver and throughout Colorado and also North Carolina.
