Tips for Small Businesses in this Economic Environment

At least once a week I meet with a small business owner who due to one or two bad business decisions has not only caused his or her's business to fail but has also pushed the owner into personal bankruptcy. Many of these businesses have great people behind them and offer needed services but due to a lack of pre-planning the business fails and drags everyone associated down with it.

In my former life before starting my bankruptcy practice I practiced corporate law and assisted companies with both their formation and their day to day transactions.

For anyone thinking about starting a business I would offer the following tips:

1. Think long and hard if you REALLY need that expensive office space when you just getting started. There are so many great virtual office space companies in Atlanta and the surrounding area that you can have a receptionist, conference room and professional appearance for under $100 per month. These leases also tend to be on a month to month basis so that if things do go south you can terminate your lease quickly.

For those of you who must find commercial space for your business remember that in this current market you have a lot of leverage in terms of what you can negotiate. Although most commercial landlords will TRY to have you personal guarantee the lease you should never do this and instead sign on behalf of your company. In the event that business does tank the landlord will not be able to sue you personally.

2. Make sure that you have funds set aside to run your business without any profit for AT LEAST 6 months. Optimism when planning your revenue stream is not a good idea. You need to be prepared for a worst case scenario to ensure that you will not be forced to dip into your personal lines of credit and credit cards to keep your new business afloat. I cannot tell you the countless clients I have filed bankruptcy for that funded their start-up on their credit cards and then when the business failed could not just walk away from the business but had to declare personal bankruptcy.

3. If you have a business partner or a group of partner you need to make sure that you are involved in ALL decisions regarding the company and that management functions are WELL defined. One of the common characteristics that I see in many small business related bankruptcies is that multiple law suits and allegations have arisen among the partners because the money is gone and someone is left holding the bag in the way of a personal guarantee on debt.

It usually appears to be a combination of poor pre-planning and naievity of the other partner or partners. There really is no such thing as a "silent" partner because if you are going to protect your name and your investment you need to know the day to day happenings of your business.

A good operating agreement is also a pre-requisite before entering into any venture to ensure that everything is in writing so that there is no confusion on duties and responsibilities.

4. Make sure that you own your intellectual property. There is nothing worse than launching your business and it starts making money and you get slapped with an infringement lawsuit. Not only is this REALLY expensive but it also keeps you away from running your business.

5. Don't ignore lawsuits! Make sure that you reach out to friends and business associates and get the name of a good litigation attorney to turn to when you are facing any type of business dispute. When establishing a business plan you should always allocate for legal expenses.

6. If you have employees or sell products make sure that are complying with all state agencies for taxing and reporting. Many of my small business clients in their excitement to start a business fail to make sure that they are reporting to the required state agencies. After years of non-payment these fees and penalties can be huge and many are not dischargeable in a bankruptcy and must be paid back from your pocket. Establish good business habits from the start to avoid this headache.

Starting a business can be the fruition of a long awaited dream. Just make sure that your dream does not turn into a nightmare and take the proper steps to protect yourself.