If you have been a small business owner for some time, it is not uncommon to feel stuck when you are trying to grow your business or realize that there are roadblocks stopping you from finding that growth you're looking for. In today's Freedom Friday blog, I want to cover some of the steps you can take as a small business owner to remove roadblocks, get unstuck, take your small business to the next level, and find the growth in your small business that you're looking for.
First of all, if you're running your small business as a DBA (“doing business as”) or using a trade name instead of an LLC or other business entity, this type of operation can be a major roadblock and hindrance to experiencing growth in your small business. Especially if you are looking to hire employees or open a business bank account in your small business's name, operating as a DBA will stop you in your tracks. The very first thing you should do if you are looking to grow your small business is make sure you have formed the proper business entity and keep business formalities. If you are operating as a DBA, here are some simple steps you can take to transition to an LLC or another business entity:
1. Form the LLC or Business Entity and Withdraw Your DBA
If you registered your DBA with the Oklahoma Secretary of State, you need to withdraw your DBA first and wait at least sixty (60) days before you file your business entity documents with the Secretary of State. If you choose to form a limited liability company (LLC), then you will file your articles of organization with the Oklahoma Secretary of State. However, the Secretary of State will not let you name your LLC the same as your DBA name, unless you withdraw the DBA name first.
2. Prepare Your LLC's Operating Agreement
Most small businesses at this stage of growth will choose an LLC, but depending on your industry, you may choose to form a different business entity. As always, it is best to consult an attorney when choosing which business entity to form with your small business. If you decide to form an LLC, the next step is to prepare an operating agreement which will guide the LLC in its operations as a business entity. You can hire an attorney to prepare your operating agreement, or you can use an online resource (not recommended) to draft one for you.
3. Apply for an EIN
A federal EIN is an “Employer Identfication Number,” which is the tax ID number for your business entity. It is assigned by the IRS, and it is basically the social security number for your small business. Even if you choose to become an LLC, most banks will require an EIN in order to open a business bank account.
4. Open New Accounts or Change Existing Accounts
Any accounts you established while operating as a DBA were made with you personally. These included bank accounts, vendor accounts, and registrations with state and local government agencies. This is the time to transition these accounts to your new LLC or business entity instead of you personally.
5. Assign or Change Contracts
If you've signed any contract while operating as a DBA, those contracts either need to be assigned to your LLC or business entity, or otherwise changed. It is a good idea to go back and read the contracts to see if they are assignable. If you can assign then, then you should assign them to your LLC or business entity. Otherwise, when the contract comes up for renewal or extension, the contract should be changed to the LLC instead of you personally and your formal DBA.
If your small business is already set up as an LLC or business entity, you may still be experiencing roadblocks that hinder you from the growth you're looking for. Here are some other areas which you may want to look at for removing roadblocks to growth:
Each time you sign a contract, you enter into a legally binding agreement on behalf of your small business, Unfortunately, a contract may have unfavorable terms, or may not be legally enforceable. It is a good idea to consult with an attorney to make sure that all your contracts for your small business are proper documents, and that your small business has a written contract in place with every vendor.
2. Employment & Hiring Practices
The Internal Revenue Service (IRS) requires you as a small business owner to properly classify any people who work for your small business as an independent contractor or an employee. If you have employees, then you need to ensure they are classified as exempt or non-exempt, which determines your obligation to pay them overtime. It is also a good idea to have an attorney prepare or review any independent contractor agreements, employment agreements, policies and procedures manuals that you may need or already have in place.
3. Commercial Leases & Real Estate
As part of reviewing your contracts, you need to review any commercial lease agreements which your small business is a party to, along with any real estate transactions. If you own property, you should have your properties reviewed to make sure any legal needs are satisfied, as well.
If your small business exists at a physical location or office, make sure you have adequate coverage with a general business liability insurance policy. If you're organized as a corporation, you might also consider Directors and Officers insurance for members of your Board of Directors.
5. Debts Owed or Owing
Lastly, you should identify any business debts, including any debts owed by your small business, or debts that are owed to your small business. If your small business owes debts, you should make it a priority to getting those debts paid and avoid collection activity or litigation filed against your small business. If your small business has problems collecting payments from its customers, or has other debts that are owed, it is a good idea to consult with an attorney to discuss what solutions might be available.
At Liberty Legal Solutions, LLC, we offer small businesses a Roadblock Removal program for a flat fee of $997. The purpose of this program will be to identify and remove any roadblocks that stop you from experiencing the growth you're looking for as a small business owner. We also offer outside general counsel services on a monthly basis starting at $150/month. For more information regarding our Roadblock Removal program, outside general counsel services, or any other legal services for small businesses, please contact me at [email protected]. For more information about Liberty Legal Solutions, LLC, please visit our website http://www.libertylegalok.com.