New Year! New Firm! Same Practical Approach

Opportunity

As I sat down to write the Jensen Law Firm’s inaugural blog post, lots of themes went thought my mind. Ultimately, the one word that kept coming to me was opportunity. As the proud owner of a new business who has spent years advising businesses of all sizes – both before and during the pandemic – I have been conditioned to look for opportunity.

The firm’s avenue to identify opportunity most often arises in the context of counseling businesses and owners/executives to use advisors in ways that maximize value and growth. That said, opportunity means different things to different enterprises and COVID has provided (for better or worse) the opportunity to take a holistic look at your business and plan for its future. Accordingly, as you seek to maximize opportunities in 2021, below are few key high-level considerations.

Manage risk

Most business owners try to manage risk primarily through insurance. While insurance is a valuable (and necessary) tool, it is but one factor in risk management. In fact, the front-line of risk for most businesses resides in a place that owners/executives often overlook – contracts.

We recommend that you periodically review your contracts of all types (e.g., the contracts that govern the operation of the business, client facing agreements, NDAs, restrictive covenant agreements, employment agreements, etc.) to ensure that they mirror the present state of your business as well as comply with the current state of the law in your jurisdiction. As an added benefit, these reviews often identify issues that when remedied will also minimize litigation risk.

Proactively avoid disputes

While we are on the subject, business litigation increases in times of stress like the current pandemic. These stresses are often particularly acute in closely-held businesses and have a tendency to expose weaknesses in internal (e.g., intra-member/shareholder relations; governance deficiencies) and external (e.g., client non-payment) processes. These issues are compounded by the fact that federal and state court systems have been unprecedently affected by COVID-19 just like other resident businesses.

Business owners/executives should take time to shore up processes to put the business on the best footing to avoid litigation. If disputes happen (they are an unfortunate part of business life), businesses should attempt to first resolve them business-to-business as the less formal forum can frame the core issues while ideally minimizing fees without the restrictions of procedural rules and deadlines applicable in litigation or arbitration.

Use proper organizational structure to support your objectives

Perhaps your business is considering:

1. raising funds
2. changing ownership
3. succession planning
4. changing growth objectives

In all of these scenarios, organizational and corporate structure play a significant role. Many sophisticated investors including venture capitalists prefer (and some require) involvement with C-corporations due to a number of factors including the ability to issue preferred stock and favorable tax considerations.

That said, a corporation must comply with inflexible governance requirements whereas LLCs can be structured and governed in myriad different ways. When jurisdiction is added to the mix (Delaware? New Jersey? New York?), a multi-factor analysis must be conducted.

2021 is a good time to consider transaction and succession planning which should include an analysis of whether existing corporate form and organizational structure is best suited to ultimate goals.

---

The JLF thanks you for your support of our new venture. The firm is happy to return the favor and be a proactive, business-forward legal resource for you and your business so that you can set and exceed goals and expectations.