- The fear of the recession has returned, but there are steps that small businesses owners can take to prepare.
- Experts recommend that businesses receive documents in order to need a quick loan or merger.
- They also recommend checking contracts with owners, contractors and employees.
Markets are stirring warning signs of a possible recession. It is a good time to fight hats.
For business owners, there is no “magic bullet that will fully protect you or make you desperate for recession,” said Noel Roycroft, Deputy Director of Harvard Law School Law Transactions Law, who advises entrepreneurs and small businesses.
But there are steps in the legal area that businesses can take to prepare.
Business Insider spoke to lawyers who advise small businesses and beginnings about the tips they would give to prepare for an economic recession.
Here’s what they said.
1. Get your documents in order
In the event of an economic downturn, business owners may want to consider getting a loan to help them through bad waters, joining another company, or selling their business to a larger one.
In any of those circumstances, small businesses want to have all their ducks for the process of proper care, said Roycroft, a former -Avoka in Ropes & Gray.
Have you paid all your taxes yet? Are your registrations updated with all relevant state and federal agencies? Have you organized all your corporate records? Do you have copies of the executed versions of all your contracts? Have you read your company bylaws lately, and are you actually following them?
Roycroft said it is better to prepare before the storm begins than to wait until something goes wrong before you realize that the business is in bad condition from a legal perspective.
“You’re playing cleaning at that point, and it’s no fun for anyone,” Roycroft said. “So the more you can pay attention to those things now, the better.”
Some states-such as Massachusetts-automatically compose corporate entities if their documents are not up to date.
“If you haven’t done it for three years, you can disperse administratively and they don’t even realize it happened,” she said. “And then they go to enter into a contract with someone and there is no longer any current legal entity.”
2. Set the fire wall between you and your business
Proper corporate hygiene is not simply important for loans and unions – it is also important for responsibility.
For small businesses, a foggy line between personal corporate finances and the owner can cause trouble. Without a firewall, the owners may be responsible for debt in possible court cases or bankruptcy.
“If people worry about court risks from creditors or parties, making sure you are following these types of maintenance obligations indicate that the business is separated from the owners and can help maintain that shield of responsibility,” Roycroft said.
3. Get your personal finances okay
If a small business needs a loan and has little wealth, the owner will often be required a personal guarantee, Roycroft said.
For this reason they must have their own Its own financial life organized For the lenders to analyze, she said.
Roycroft warned that such an agreement could be dangerous, especially during an economic downturn because the owner could be required to pay the loan.
“If you were a corporation or a LLC and enter one of these loans, they can now seek to be paid against your personal assets and not just businesses,” she said.
4. Consider the trading debt for equity net
In addition to loans, small businesses owners may consider facilitating their debt load by renouncing the capital of existing lenders.
This agreement could give the lender “skin in the game” and empower the business, said Jonathan Asin, a professor at the Brooklyn Law School who oversees the Center for Urban Business Entrepreneurship.
“You don’t have debts that come because you have potential net capital partners who want to see you succeed as much as possible,” Askin told the deal.
Some lenders – or even contractors who owe money – can also accept driven compensation during a recession, said Kan.
“If we see light at the end of the recession tunnel, then everything you need to overcome that bumps through renegotiating and getting people to see your long -term vision, I think it’s useful,” Kanin said.
5. Make sure you own your intellectual property
Small businesses often bypass the good suppression of their agreements with independent contractors, Roycroft said.
An ordinary issue, she said, is that independent contractors or employees do not transfer to IP rights for everything they created for business.
This can be a headache if the business is looking to join another. The contractor may have their own lever because they still have important IP ownership for the business, Roycroft said.
6. Check your rent
For companies with brick and mortar businesses, rent is often the biggest expense.
Roycroft suggested to check for small businesses owners to control their rental agreement and ensure that they understand their obligations and rights.
“By making sure you understand, ‘If I miss a rental payment, what can happen and what are the notification requirements in it? How can I notice the owner? How does the landlord send me?” “She said.
There may be opportunities to renegotiate. While large corporate owners tend to have more power than small businesses, no one wants to see a free store, she said.
Askin also suggested negotiating rules for sub-centers, which can facilitate rental liabilities.
The landlords may also consider lowering the rent for some capital, said Askin.
“There may be owners of the owners who see your venture’s long -term future and may want to have skin in the game,” Kanin said. “Maybe they will be interested in giving you a reduced rate for part of the business.”
7. Use legal advisers who will save you money using it
The artificial intelligence era has introduced great efficiency in the legal industry. Askin recommended the use of the funds driven by him and the legal firms that exceed some of those cost declines to their customers.
“As a business person, I would benefit from as many free legal resources or pro-Bono as possible,” Kanin said. “I don’t think it’s sure to abandon human legal advice, but there are ways to automate legal processes so that you can use more effective legal support services.”
He also recommended that business owners take a look at their processes and see if the means of he could automate certain functions.
“If you are not digging deep into him, you’re behind eight balls already,” said Kanin.
8. Understand your obligations to employees
Recipes usually mean that businesses have to tighten their belts. Roycroft recommended washing state and federal laws regulating how employees are treated. Are they willingly employed? Do they have a union contract? Do they require a certain amount of disconnection or vacation notice? Are they a wool option?
“God save us that you have to start letting people go, but it can happen in a recession,” Roycroft said.