Dealing With A Layoff

A layoff can occur unexpectedly, without warning and be a scary ordeal. You may be asking yourself, “Why me?” Getting laid off is never easy and it’s certainly never a good feeling. Beyond the initial shock, concerns over your short and long-term financial security and stability can make a difficult situation worse. It’s important to plan ahead for worse-case scenarios and have an established reserve fund (refer to my post Planning For A Rainy Day) to fall back on and help mitigate some of the immediate impact. Don’t rely on severance and/or unemployment benefits as your only fallback. Severance isn’t guaranteed (ex: if the company doesn’t offer severance, if you don’t meet the company’s requirements for severance or if the company abruptly folds) and unemployment benefits will only provide partial wage replacement for up to twenty-six weeks. If you don’t currently have an established reserve fund, make it a priority to start building one now.

When you’re informed that you’re going to be laid off, listen and focus on the information provided to you and be sure to ask questions if you don’t understand something. While it may be an emotional period, it’s important to compose yourself and gather as much pertinent information as it will be extremely vital when it’s time to figure out your next steps. The person(s) taking you through the process (ex: HR Manager) should go over a variety of areas including, but not limited to: the layoff effective date and your official last day, standard procedures when an employee is let go, severance (if applicable), final payroll and wages, health insurance coverage termination date, eligibility for COBRA, 401(k) distribution paperwork (if applicable), who to contact for additional questions or inquiries and so forth.

You may given a termination letter or related documents pertaining to your layoff. Again, review the information carefully. Ask questions. Get copies of all relevant documents for your records. Be sure you know who to contact if you have additional questions or need to follow-up on outstanding matters. You may also be provided with information so that you may apply for unemployment benefits. Be sure to check with your state’s Unemployment Office for eligibility requirements, how and when you should apply for benefits. You’ll want to apply for benefits as soon as reasonably possible once you become eligible as your first unemployment payment may take a few weeks.

Do not burn bridges with your employer! Avoid the knee-jerk reaction! Stay professional! You may need references from your former employer, managers or supervisors and burning bridges won’t help the situation.

If you haven’t kept your resume and portfolio (if applicable) up-to-date, get on it right away especially if you plan to get right back into the workforce. You’ll want to get your resume and portfolio (if applicable) updated, polished and out there for prospective employers to see. There are options available for job seekers including posting resumes online and searching through job boards (ex: monster.com, indeed.com, careerbuilder.com, ziprecruiter.com, etc.), working with hiring consultants and/or staffing firms, attending networking events and traditional word-of-mouth, just to name a few. You may also want to consider looking at freelance, project or part-time work that offers you short-term income until you can find a permanent, full-time position. Keep in mind that temporary or part-time work may affect unemployment benefits so check with your state’s Unemployment Office for further information and guidance.

Capitalize on this period of unemployment. Learn new skills or brush up on existing skills, take some classes or seminars, reconnect with friends and network, pursue a side hustle and take some time to focus on your own health and wellness. This is also a good time to reflect on your short and long-term goals and objectives. Perhaps it’s time to pursue a career change or explore starting your own business. Don’t let a layoff knock you down! Turn this negative situation into positive opportunities!

Before You Sign That Commercial Lease . . .

Finding commercial office space can be quite a challenge. While there’s certainly real estate available, finding the right office space that satisfies your business needs, fits your business vibe, is conveniently located, offers your business the flexibility to grow and which falls within your budget doesn’t necessarily come easy. And, even if you should find that “perfect” or “close to perfect” office space, you’ll still need to negotiate fair lease terms and work out the language in the final lease agreement before it’s a done deal. You don’t want to blindly sign on the dotted line!

First, negotiate the lease terms with the landlord. If you aren’t a strong negotiator or don’t feel you have the experience to negotiate, seek an experienced and qualified real estate broker who specializes in working for and in the interest of tenants. They should have insight into the real estate market and relationships with buildings and landlords to help you find the right space and negotiate, in good faith, fair terms with the various buildings and landlords.

Keep in mind that there are various factors which may help your negotiating power including, but not limited to: prominence of your business, size and financial position of your business, amount of commercial real estate space you intend on leasing and the length of the lease term (a longer term lease may offer you stronger negotiating power over a shorter term lease).

Once you’ve negotiated the lease terms to a point which are reasonably fair and agreeable, the landlord will have their legal counsel draw up the lease documents. Be sure to read the commercial lease agreement and all the applicable attachments, amendments, riders, guaranties and related documents thoroughly. Be sure that the lease terms and conditions, responsibilities and obligations of both the tenant and landlord are clearly spelled out and align with what has been agreed to during the lease negotiations. These include, but are not limited to: the start/end date of the lease, the lease term (number of years), the lease renewal and termination provisions, the date landlord shall deliver possession of the premises to the tenant, the date in which tenant shall surrender the premises to the landlord, base rent and any applicable rent abatement(s), additional fees and costs outside of the base rent (ex: cleaning, security, water/sprinkler), annual rent escalation (percent increase), proportionate share of property taxes and other applicable costs/expenses beyond the base year, the base year to be used for calculating property taxes and other applicable costs/expenses beyond the base year, electricity costs (ex: if the space is individually metered), HVAC (ex: if HVAC is tenant controlled – annual maintenance agreement requirement, who is responsible for repair/replacement of major components like compressor/condenser or replacement of the unit(s) in the event of a failure during the lease term? the landlord’s certification that the existing HVAC unit is in good operating condition; if HVAC is not tenant controlled, availability and costs for after-hours and weekend use), security deposit requirement, office space build out work and responsibilities, work to be performed by landlord, work to be performed by tenant (if work requires written approval by landlord), landlord responsibilities, tenant responsibilities, cost for building and office keys/key cards, covered and non-covered (a la carte) building services, commercial insurance requirement, “good guy” clause, etc. These are just some of the common items that typically appear in a commercial lease agreement which you should be on the lookout for and review carefully.

Even as an experienced business owner well-versed in negotiating contracts and agreements, it should go without saying that you should tap into and consult with a good real estate attorney who will thoroughly review the lease agreement and all the applicable attachments, amendments, riders, guaranties and related documents to make sure they are in order and contain the appropriate language to protect your interests. Let me be clear, having a good real estate attorney review the lease agreement does not mean that you should “pass the buck” and not exercise due diligence. YOU need to review the lease agreement thoroughly, make notes and consult with the real estate attorney so that you have a thorough understanding of what you are getting into before you sign and commit to the lease agreement. Don’t assume anything! Ask questions, get clarification and be sure you fully understand and are comfortable with the provisions of the agreement. Don’t think for a moment that any questions are stupid or silly. If it’s ambiguous, vague, unclear etc., get clear, definitive answers! Contracts and agreements often contain legalese which are difficult to fully comprehend and understand and may be vague and ambiguous.

Commercial leases are written for and inure to the benefit of the landlord. The objective is to try and get the lease terms to a point where the terms provide adequate protections, to the maximum extent possible, for you – the tenant. There may be several rounds of back-and-forth between you (and your legal counsel) and the landlord (and the landlord’s legal counsel) before you hash out the final language of the lease agreement so be patient, be thorough and exercise continued due diligence. This is one of those things where taking shortcuts will be more harmful than helpful. Don’t take shortcuts! Stick with best practices!

One final note . . . give yourself ample time to work through the process of lease negotiations and towards a final agreeable and acceptable lease agreement and whenever possible, have a backup plan. If you, with the advice of counsel, don’t feel comfortable with the lease terms and the landlord is not acting in good faith, don’t give in and don’t sign the lease agreement! Be prepared and willing to walk away! You don’t want to be stuck in an agreement for which you will ultimately regret!

Customer Service Can Make or Break Your Business

Customer service is a core part of many businesses. When customers reach out to or for customer service, quite often it’s about a problem or an issue that requires a resolution. Customers are typically looking for someone who is going to listen to and understand the issue at hand. They are looking for someone who understands that there is a sense of urgency, the issue needs to be treated with a level of priority and that it will be addressed in a timely manner. Customers are also looking for accountability; someone to take charge, be responsible and follow through from start to finish to ensure the problem or issue reaches final resolution or is escalated appropriately and promptly up the chain until reaching that resolution.

Talk is cheap! Customers want results!

It’s important to note that this is not the time to upsell or downsell to customers. Upselling or downselling is not a solution or resolution to a problem or issue. These are retention tactics, plain and simple! Sure, some customers may be taken in by the tactic while others who understand the retention tactic may manipulate it to their advantage. For real problems or issues, this will likely infuriate customers, especially patrons. Fair warning: If you’re going to play with fire, you’re going to get burned! Put your customers first! Focus on resolving the issue at hand in a timely, effective and efficient manner. Don’t give your customers the runaround and don’t make them jump through hoops. In the end, it can have serious repercussions on your business and its reputation.

Any business that is defined, in whole or in part, by the quality of their customer service, their customer service reputation and customer satisfaction rating MUST step up and provide an exceptional, premier level of customer service to their customers not only to differentiate themselves from their competitors but also to demonstrate and prove to their customers that they have earned and deserve their customers’ business. Anything less is simply unacceptable.

Making Investments in Your Business in the New Year

As we prepare to close out the year, business owners should take the time to evaluate their current business operations to determine what investments they need to make in their business heading into the New Year and begin planning & budgeting for those investments. This includes investing in staff (ex: hiring additional employees, employee training & education, health & wellness programs, incentives & retention programs), investing in technology (ex: computers, servers, software, storage, network equipment) and investing in infrastructure (ex: office/office space, furniture, fixtures) just to name a few.

While planning and budgeting for potential investments does not guarantee that business owners will be able make those investments into their business at any specific time (ex: due to financial constraints, weak business performance, unforeseen circumstances), business owners should still be proactive rather than reactive. Perhaps the investments may not occur in the first or second quarter of the year but may be possible in the third quarter.

In some situations, business owners may need to front-load the investments to achieve future business performance gains. For instance, if your business is a design firm relying heavily on up-to-date technology, but you are running outdated computers and software, you’ll need to make investments in technology to get updated computers and software NOW, so you can get the work done. If you can’t get the work done, your business will be unable to stay afloat. Likewise, business owners may need to hire an additional employee to help in critical areas to get work done and meet timetables. The successful completion of a client project can result in future projects (and additional income) but failure could mean the loss of the client (and loss of significant income). In these situations, business owners MUST make the investments immediately rather than postpone or delay them to a later date.

To help manage the business, business owners should utilize financial projections. Income projections (and if needed, cash flow projections) can be an extremely useful tool in helping to manage the business but keep in mind that projections are exactly that – A PROJECTION. The more reliable financial information that you have available, the better your projections will be; however, projections are NOT SET IN STONE!

Business owners who are unfamiliar with financial projections should work with their lead or senior Accounting/Finance person (ex: CFO, Director of Finance, Accounting Manager, Head of Accounting/Finance) to create/prepare financial projections for the business for the upcoming year. If you don’t have a lead or senior Accounting/Finance person, consult with your Accountant or CPA Firm for guidance. While preparing financial projections is not overly difficult, it does require a level of experience.

Employee Bonuses Are Taxable Income

Now that the holidays have arrived and with year-end fast approaching, as a business owner, you may be considering distributing year-end bonuses to employees as a show of appreciation for their passion and dedication to the business this past year. It’s important to remember that bonuses are treated as taxable income and should be processed and reported accordingly.

You should process your year-end bonuses through payroll and follow standard payroll practices to ensure the proper tax withholding for federal income tax, state & local income tax and FICA (Medicare & Social Security Tax). Generally, bonuses can either be run as an additional payroll outside of your normal payroll cycle or added to one of your normal year-end payrolls.

If you plan on running an additional payroll, check with your payroll company on how to submit the additional bonus payroll. Your payroll company will usually require bonus payrolls (or additional payrolls outside of your normal payroll cycle) to be submitted several days in advance of your regularly scheduled payroll. Pay close attention to the payroll submission due dates to ensure your bonus and year-end payrolls are submitted on a timely basis. Also, make sure your business bank account is adequately funded to cover your added year-end business expenditures.

If you have questions or concerns regarding the proper handling of bonus income, check with your payroll representative and/or your business tax professional (Accountant/CPA firm).

A Job Interview Is A Two-Way Street!

Job interviews can certainly be nerve-racking. While they may open the door to potentially great opportunities and hopefully, to a long bright future, they can unquestionably make you nervous and feel uneasy for good reason. Job interviews are an opportunity to showcase your credentials, demonstrate credibility and make an impression (hopefully, a very positive one) that will resonate long after you leave the interview. If the job interview is for that “dream job” that you’ve searched long and hard for, a great interview could land you that “perfect job” while a poor interview may leave you feeling defeated and devastated.

That said, it’s also important to understand and realize that job interviews are a two-way street. Yes, it’s your opportunity to showcase your credentials, make a lasting impression and statement about why you should get the job; BUT, it’s also an opportunity for YOU to evaluate the job opportunity to determine if it truly is the right match for you.

Use the job interview to assess the job opportunity thoroughly beyond the basics like job function/duties, compensation and benefits.

What is a typical work day like?

You’ll want to try to get a feel for what a typical day in the life of this job would be. Yes, no two days are alike but what are some of the things that you can expect each day from basic to moderate to extreme. Is it a fast-paced, be quick-on-your-feet type of job? Is it a seasonal type of business? Are there peaks and lulls? Is it a 24/7 type of business where you’ll be constantly on-call or is it more of a “9 to 5” or “8 to 6” type of job?

Does this job offer a good personal/work life balance?

While you’re certainly willing to put in 110% towards the job, it’s vital to have a good personal/work life balance to manage stress and avoid burnout. If you don’t take care of yourself, you won’t be effective or efficient in what you are doing. During the interview you’ll want to try and get a sense of what the personal/work life balance will be like in this job. As eager as you may be to get the job, you also don’t want to regret it immediately thereafter.

What is the culture, atmosphere and environment like? Do you like and feel comfortable with the culture, atmosphere and environment?

You’ll be spending a good amount of time in this job, so this is very important. Be sure to look around the office and try to gauge the atmosphere. Pay attention to how people act, behave, respond, interact, operate and so forth. If you meet with multiple interviewers or other company employees, it’s a great opportunity to gauge your interaction with each interviewer and employee. You can learn a lot from just having conversations with various people within the company. Also look around the office, how it’s setup, organized and arranged. The look and feel of the office can say a lot about the environment, atmosphere and culture. Rely on your senses and instincts.

What are the opportunities for growth & development? What is the outlook for the future?

You want to get a sense of what the future will look like for both you and the company. Obviously, if this is a job and more importantly, a company that you hope to spend many years with, you’ll want to have room and opportunity to grow and develop. If the outlook is that it’ll take 3-5 years before you can make a move within the company, you’ll need to decide as to whether this is the right fit for you personally and career-wise. Sometimes you may take a position that isn’t quite in your area of interest but has the potential to get you into your area of interest with the caveat that it will take several years. You need to decide whether taking this job is the most appropriate course of action or whether it’s better to seek a different opportunity. How does this fit into your short and long-term personal & career plan?

You’ll also want to get a feel for where the company stands currently and where it is going. If you walk into a company that appears to be on its last leg, you’ll seriously need to take this into consideration because you know that within a certain period, you could be on your way right out the door. On a similar note, if a company is in the process of a merger or acquisition, there is the potential for downsizing or elimination of duplicate roles or job positions. While mergers and acquisitions are a way for companies to grow & expand rapidly and may result in benefits for some employees, there is always the potential for job losses.

So, the next time you go on a job interview, keep in mind that it’s a two-way street. The interviewer is exercising his or her due diligence and so should you!

Considerations When Starting A Business: Seeking Professional Counsel

As you get started with your new business, there may come a time when you will need to seek professional counsel from a good business law firm and/or CPA firm. Even if your circumstances may not warrant professional counsel at the onset of your new business, you may eventually need to seek counsel as your business grows. Speaking with a good business law firm and/or CPA firm can help you stay on the straight and narrow and in compliance of the constantly changing local, state and federal regulations, requirements and laws.

Legal Counsel

A good business law firm can provide an array of vital services to your business. They can provide key legal counsel during the initial setup and establishment of your new business, helping you to better understand what the legal implications of your new business venture will be. They can offer important insight to help you operate your business legally and avoid unnecessary risks. They can also serve as a critical line of defense between you, your business and potential third-party litigation.

Business law firms can help you figure out the best legal entity for your business (ex: LLC, Corporation - C-Corp or sub-chapter S), assist with filing the necessary paperwork with the appropriate federal, state and local agencies (ex: Department of State, IRS) to setup the legal entity, prepare Operating or Shareholder agreements specifically customized for your business and act as a designated agent for legal notices. They can help prepare and review contracts/agreements (ex: client contracts, NDAs, merger agreements, employment contracts) and they can step in to provide legal aid/counsel in the event of legal action for or against your business.

CPA Firms

A good CPA firm can provide your business with an array of vital Accounting services. They can provide guidance on the different types of legal entities best suited for your business (ex: LLC, Corporation - C-Corp or sub-chapter S). They can provide insight on the potential tax liabilities and obligations you, as a business owner, should be aware of and can expect. CPA firms can handle a variety of required tax reporting and filings for federal, state and local jurisdictions. They should stay current on all the latest changes to the tax laws and requirements to keep you (and the rest of their clients) compliant and up-to-date on the potential impacts those changes will have on you and your business.

For instance, if your business is a single-member LLC treated as a disregarded entity for tax purposes or a multi-member LLC taxed as a Partnership, the owners or LLC members typically do not take a salary through payroll. An owner of a single-member LLC will take a draw and members of a multi-member LLC taxed as a Partnership will receive what are called Guaranteed Payments in lieu of salary via payroll. In either case, unlike salaries via payroll, payroll taxes are not withheld on the income. As such, owners/LLC members are responsible for making quarterly tax payments to the appropriate federal, state and local tax agencies on the applicable earnings. Failure to make the appropriate payments may result in a huge tax bill and tax penalty at tax time.

In addition, single-member LLCs, multi-member LLCs taxed as Partnerships and corporations taxed as a sub-chapter S (including LLCs that elect to be taxed as a sub-chapter S) are treated as pass through entities for tax purposes whereby the business entities themselves are not taxed. Taxes on income/profit are passed down to the individual owners (usually reported on a Schedule K-1) and reported on their individual tax returns. While LLCs taxed as Partnerships and corporations taxed as a sub-chapter S (including LLCs that elect to be taxed as a sub-chapter S) are not taxed at the entity level, they are still required to file the proper annual Partnership or Corporation tax returns for the applicable tax year.

This is just a scratch on the surface, but you can see how complex the tax obligations and implications can be if you don’t understand how the tax laws affect you and your business and/or have appropriate guidance from a tax professional like a good CPA firm. You and your business can easily fall into a tax maze. A good CPA firm should be an active partner in helping you and your business remain compliant with all applicable tax laws and requirements.

There will be times where it may be necessary for your business law firm and CPA firm to collaborate and work together. For instance, when deciding what type of business entity to form for your business (ex: LLC, Corporation - C-Corp or sub-chapter S), it’s a good idea to get insight from both a legal and an Accounting perspective as different types of business entities will have different requirements and implications. While your law firm and CPA firm won’t necessarily tell you which type of entity to form, they should advise you, make recommendations and offer pros and cons. You’ll want to gain as much insight from their counsel to make a well-informed decision.

It should go without saying that both business law firms and CPA firms can be quite expensive so it’s important to know how and when to properly use these professional resources to avoid unnecessary costs. Far too often, business owners use professional counsel prematurely, fail to use counsel until situations get out of hand, don’t know the right questions to ask and/or how to lead, manage and streamline the conversations. Before you speak with a business law firm or CPA firm, take some time to gather your thoughts and put together an overview of what you want to discuss and the questions you want to ask. Try to keep the conversations on point and focused. Don’t be afraid to ask questions if you are unsure about something being discussed. At the end of any conversation with a business law firm or CPA firm, you should feel comfortable that you have gotten the answers that you needed to get from the conversation.

Keeping Receivables In Check

As a business owner, receivables (accounts receivable or A/R) are a vital part of your business. If you are not billing or invoicing clients and consequently, collecting those receivables in a timely fashion, your business will be unable to sustain itself. Without a steady, positive cash flow, you will be unable to make payroll, buy supplies or inventory, make investments into your business and/or pay vendors and other business operating expenses.

It is also important to understand that billings or receivables do not necessarily represent 100% income or revenue when there are applicable direct costs (ex: cost of sale, cost of goods sold). Why is this important? Well, because you don’t want to “rob Peter to pay Paul.” If you invoice a client $10,000 for a project but $5,000 of that invoice is for direct costs to a third-party vendor, only $5,000 constitutes income or revenue (your actual business income) which can go towards paying your business operating expenses, not the full $10,000. The $5,000 for direct costs should be earmarked and set aside to pay your third-party vendor.

Far too often, some business owners don’t make this distinction and may use that full $10,000 to satisfy their immediate business cash flow needs. For instance, a business owner may choose to use that $10,000 to help cover their payroll or pay a vendor that is looking for payment on a past due invoice (aka “the squeaky wheel”). In essence, the business owner has “robbed Peter to pay Paul.” The business may be experiencing a cash flow issue and has decided to use the cash that is due and payable to another vendor to pay other business expenses or other vendors. While this may not seem like a bad thing on a short-term basis to satisfy immediate business cash flow needs, there will be a domino effect which will ultimately impact the business in the long-term. It should go without saying that this is a terrible practice to follow!

So, how can you keep receivables in check?

Billings - It’s important to stay active and on top of client billing. For a small business with limited resources and staff, the business owner may need to be the one to take care of billing or perhaps you have a billing clerk or third-party that does billing for your business on a fixed schedule each month. Whatever the case may be, you must get your client billing done on a timely, regular basis. How often you bill or invoice your clients may depend on existing client contracts or agreements that are in place and/or when a project or phases of a project are completed (ex: milestones); however, the most important part is to get your billing done and invoices out to clients as soon as possible. Book those receivables!

Collections – Typically, you should have established payment terms with your clients. Your client contracts or agreements should state the specific payment terms and your invoices should re-iterate the general payment terms (ex: Due upon receipt, NET 10, NET 15, NET 30). Monitor your AR Aging on a weekly basis. Your Accounting platform should be able to generate reports like an AR Aging Summary and Open Invoices. Depending on your comfort level with your clients, you may extend the courtesy of up to NET 30 payment terms, even if your standard payment terms are due upon receipt. Regardless of the courtesy that you extend to a client, when invoices go beyond NET 30 payment terms, you need to actively follow-up with clients on the status of payment. Be sure to send past due notices which include copies of the past due invoices, send account statements and follow up directly with your clients by phone and/or e-mail. Be active and NOT passive!

Be sure to invest in a good Accounting platform that allows you to generate invoices and statements as well as offers robust reporting to provide you with the necessary financial reports that serve your business needs. Try to use platforms that are widely-used, familiar and popular. It will be a lot easier to find people who are experienced using these types of platforms should you need to bring someone in to manage or takeover your books.

When possible, send invoices to clients electronically whether through the Accounting platform (if supported/available) or by e-mail (ex: PDF attachment) in lieu of regular postal mail. In addition, consider accepting electronic payments from clients (ex: wire, ACH) instead of paper checks. This should help to minimize lost checks and may speed up payment turnaround time. When considering electronic payments, check with your financial institution to see if any fees are applicable to these types of transactions. Many financial institutions will offer ways to avoid and/or reduce bank and transaction fees.

Best Practices for Small Business Corporate Cards

A business credit or charge card can be helpful for business owners when it comes to making purchases and paying expenses on behalf of your business. However, it’s extremely important to develop best practices when it comes to managing and using these cards.

When applying for a business credit or charge card, determine the type of card that best suits your business needs. A business credit card, just like a personal credit card, will offer you a fixed credit limit and the ability to pay over time while a charge card will have no preset spending limit (not to be confused with unlimited spending power) and will typically require the balance be paid in full each month. It should go without saying that you should only spend what you can afford so that you can afford to pay your monthly bill in full every month. Paying over time will not only cost more in the long run (due to accrued interest) but also set you and your business on the path of accruing unnecessary debt.

As a startup or small business, you’ll want to find cards that offer no annual fee while still offering some bang for the buck (ex: sign-on bonuses, cash back rewards, points for every dollar). As your business grows, you may need to upgrade or switch to a different card that offers you greater benefits and rewards, but keep in mind that you may need to pay an annual membership fee to gain some of those added benefits and rewards. While paying an annual membership fee won’t necessarily break the bank, don’t go off and get a credit/charge card with a $400 or $500 annual fee if the value of the benefits and rewards do not help offset the cost of the annual fee.

A business credit or charge card, unlike a personal card, is intended for legitimate BUSINESS expenses only. Do not get into the habit of mixing business and personal expenses on a business credit or charge card. Cardholder agreements will usually state that business credit or charge cards are only to be used for business expenses. While card issuers may not audit every transaction made on a business credit or charge card, failing to keep your business and personal expenses separate can pose risks and liabilities including piercing the corporate veil and you could face penalties if your business were to undergo an audit by the IRS (ex: treating personal expenses as deductible business expenses). Just don’t do it!

If you are planning on issuing additional business credit or charge cards to employees, be sure to limit the number of cards to only those employees who absolutely require one for legitimate business purposes. Also, be sure to have written policies in place on the proper use of business credit or charge cards. Make sure every employee understands the current policies in place and provide refreshers as needed. As part of your written policies, you may want to include a policy requiring employees to obtain pre-approval or pre-authorization by management before any charges are placed on a business credit/charge card and/or set spending thresholds which require additional management approval.

Make sure that for every transaction on the card, there is a corresponding receipt for the purchase. You should also require that a monthly reconciliation (ex: expense report) for each card be submitted along with copies of all the corresponding receipts for the applicable charges. Be sure to thoroughly review every monthly statement for accuracy and to protect against fraudulent charges. It can also be beneficial to enable alerts on each card and on the master card account and to frequently monitor transactions on the cards. All card issuers should have an online dashboard which allows you to monitor all the card accounts and transactions on your master account.

With some business card accounts, card issuers will allow you to select billing options for your cards. For example, one option would be to receive a single master bill for your business credit/charge card account with a breakdown of each individual card and the respective charges.  The business, upon reviewing and reconciling the statement, can then pay the master bill each month. Another option would be to have individual credit/charge card bills issued to each cardholder. Each cardholder would then be responsible for paying their respective bills and then submit those expenses back to the business for reimbursement. The latter option would add an extra layer of protection for the business to prevent and deter unauthorized spending on a card.

Business credit and charge cards can be a useful and vital tool in helping a business owner manage and run his/her business, but like anything else, they must be used properly and responsibly.

Considerations When Starting A Business: Putting Together A Game Plan

Now that you’re ready and committed to starting a business, you need to put together a game plan. There are a lot of moving parts when it comes to starting a business so it’s important to be organized, detail-oriented and have all your ducks lined up. You’ll first want to take a “view from 10,000 feet” and then drill-down into the specific details.

During the process, gather information and be prepared to answer a series of questions related to your business venture. This information will be extremely helpful during the setup of the legal entity and establishing business operating parameters as you begin operations. In addition, if you need to consult with professionals (ex: business law firm, CPA firm), this information will help to streamline the conversation. You’ll learn quickly that streamlining conversations and meetings are crucial when dealing with law firms and CPA firms, especially if you don’t want to rack up enormous legal and accounting bills.

Below is a list of questions that you should seek answers to. This list is not intended to be a complete list of questions but serves as a starting point in putting together your game plan.

  • What type of business do you plan on starting?

  • Will you be the sole owner or will there be other owners?

  • Do you or any of the other owners have non-compete agreements (or similar) that would prevent or prohibit you and/or the other owners from joining or participating in this business venture? Are there any potential conflicts of interest?

  • Are you or any of the other owners currently participating in or are a part of another business venture, whether in the same industry or a different industry?

  • Will the business be owned by individuals, another business entity or a combination of individuals and business entities?

  • What will be the name of your business?

  • Is the business name unregistered and available to register with your state’s Department of State?

  • Are there any other individuals, companies or organizations using this business name or names similar that may cause confusion for clients/customers and/or pose legal issues (ex: trademark)?

  • Is the corresponding Internet domain name available for your business name?

  • Are the corresponding social media handles available for your business name?

  • What type of legal business entity is best for your business (ex: LLC – single-member LLC, multi-member LLC taxed as a Partnership, LLC taxed as a sub-chapter S, Corporation – C-Corp or sub-chapter S)?

  • What will be the designated role (ex: job function or area of responsibility) of each owner?

  • What does each owner bring to the table of the business venture?

  • How will the business be managed (by the owners, by designated managers, by owners and designated managers)?

  • How much starting capital do you and your partners have to invest in the business?

  • How much capital will you and your partners need to invest in the business to cover startup costs and at least the first three to six months of business operating expenses?

  • If you and your partners don’t have the necessary capital, how will you and your partners secure the necessary capital (ex: bank loans)?

  • Do you and your partners have a solid credit history and a good/excellent credit rating? Do you and your partners have collateral, if necessary?

  • When do you expect to officially begin business operations?

  • Will the business operate in a single state or multiple states?

  • Where will the principal office for the business be located? Will there be a single office location or multiple office locations?

  • Will you require commercial space for your business?

  • Will you be hiring employees?

  • Will you be using independent contractors or external personnel?

  • What resources will you require to operate your business (ex: supplies, equipment, software)?

  • Do you currently have or are you working with existing clients?

  • Who are your target clients or customers?

  • What’s your business plan or strategy for acquiring new clients or customers?

  • If your business requires inventory, how do you plan on acquiring, storing and securing inventory?

  • Will your business be required to collect sales tax?

  • Does your business operate within an industry that has industry-specific or governmental requirements (ex: certifications, memberships, licenses, permits, insurance)?

Considerations When Starting A Business: You’re Not Going To Know Everything

Part of starting, owning and running a business is LEARNING and rest assured, there will be a lot of learning! Look, you’re not going to know everything on day one. You can read books, magazines, professional journals, articles and blogs on starting/owning/running a business. You can watch videos, attend conferences, meet and speak with other business owners, industry experts, advisors consultants and professionals. The simple fact is there's so much information, so many rules and regulations, so many processes and procedures, and so forth that it will be a journey and learning experience.

That said, there is great value in educating yourself and having conversations with experienced business owners and professionals before you get started and as you operate and run your business. You don’t need to “reinvent the wheel” and you can certainly get some great pointers and valuable advice. Being well-informed and well-educated will help you early on in making some crucial business decisions and hopefully, help you avoid painful and/or costly mistakes. While every business and business owner faces challenges and is thrown a curve ball now and then, remember to take a step back, take a deep breath, keep a cool head and exercise calm and patience during these times. You don’t need or want to exacerbate the situation.

Keep in mind that starting, owning and running a business doesn’t require that you know everything about starting, owning and running a business. However, you should understand certain basic fundamentals and principles as well as the do's and don'ts when it comes to starting, owning and running a business. It's also important to know who to tap into and where to go to get answers and assistance from when necessary. You’ll quickly realize the importance of having access to and consulting with a good business attorney or law firm and Accountant or CPA firm. We’ll dive more into this in a future post.