A commercial real estate attorney can save you money during your lease term!

The commercial real estate attorney must be consulted at the beginning of the transaction.

The Business of Staying in Business

A qualified commercial real estate attorney will help your business stay in business. Landlords often place disclaimers in their leases stating that both parties have been advised to retain counsel. There’s only one time in the entire lease transaction where Tenant can protect its rights and its business investment, and that’s before the lease agreement is signed.

The commercial real estate attorney will be your advocate, mitigating your legal risk, protecting your assets and making sure you understand what you are agreeing to and the consequences of that agreement.

Real Estate Brokers: Landlord and Tenant Representation

Real estate brokers are paid on commission, by Landlord. They get paid when the deal is done, and they have an interest in seeing it commence. The listing broker, while usually very nice, does not work for Tenant, and does not represent Tenant’s interests.

The broker is responsible for negotiating the business terms of the lease, but they are not lawyers and cannot give legal advice. They can help you find the location and negotiate business items, but they do not offer a legal perspective.

The attorney’s compensation isn’t tied to the transaction, which means a balanced perspective on the entire negotiation process, and representation in the best interest of the client.

Professional Operators

Landlords are in the business of being owning and managing property profitably, and will have professional service providers working for them and protecting their interests. Tenant also needs a professional to represent them in the transaction. It’s a signal of sophistication and professionalism, and an indication of a thoughtful tenant setting up for success. The Landlord will not be offended if Tenant engages a commercial real estate attorney.

The commercial real estate lease is usually one of the most complex and expensive transactions in a business life cycle. It’s a long-term, binding legal commitment, and it’s not easy or cheap to change after signature. Consumer protection laws don’t apply, like they do in residential real estate transactions. Landlords don’t use standard contracts, but have custom forms that are drafted to favor them. Landlord expect a savvy tenant to negotiate.

What a Commercial Real Estate Attorney Does

A dedicated commercial real estate attorney will provide a legal review and negotiate with your end goal in mind. Tenant want a predictable price for a safe and secure place to operate, and Landlord wants steady cash flow and a fully leased location. Don’t use an attorney that has “leasing” or “real estate” as one bullet point among many; chose someone with experience in your market, your industry, and with your type of lease.

You need a representative and an advocate who can provide strategic, business-oriented legal advice to move the leasing transaction to completion without sacrificing financial or legal protections. A good real estate broker can make a recommendation. An experienced commercial real estate attorney will protect your interests and help reach your ultimate goal: get the rights and responsibilities of each party outlined, and to negotiate a fair and equitable commercial real estate lease agreement.

This article does not create an attorney-client relationship. This article is for general education purposes only and is not legal advice. You should consult with a qualified attorney before you rely on this information.

Why Does a Small Business Need a Business Entity?

The right business entity can empower a small business operation.  The entity will grow and evolve with the business.  It will protect the owner of the business, and the owner’s personal assets, but it has to be done correctly to get the full legal and tax advantages.

Personal vs. Business Assets

The business entity, properly formed and kept current, will help protect the business owner’s personal assets. All businesses have liabilities, whether its payments to suppliers or employees that are due, or something more drastic, like a lawsuit if an employee or customer gets hurt by the company’s product.

If a person is operating a small business, but hasn’t filed for a business entity, then by default, the person created created a sole proprietorship (one owner) or a general partnership (multiple owners).  The operator is personally liable for the debts and actions of the company. If the company gets sued, or owes money, then the owner’s personal assets (bank accounts, car, house, etc.) are now at risk.

So How Does a Business Owner Protect Personal Assets?

  1. Incorporate the business entity correctly and keep it active
  2. Observe corporate formalities
  3. Keep personal and business assets separate
  4. Operate honestly and with integrity

Correct Incorporation

Instead of letting the state pick, identify the correct entity for the business, usually an LLC (limited liability company) or a corporation.  The legal protections are similar, but there are different tax consequences to consider.  Once the business entity is formed, the business is liable for its debts and actions, and the owners are not personally liable, if the owners observe the corporate formalities

Observe Corporate Formalities

Different business entities have different obligations.  Forms (and sometimes payments) have to be filed, meetings may have to be held, and the business must have governing documents.  It might seem a little silly to have a governing document for a single-member company, but if the owner wants to sell the company, sign a contract, or doesn’t want to be personally liable in a lawsuit, it’s important to have proof that the business assets are separate from the owner’s personal assets.

Separate Business and Personal Assets

Having separate accounts for business and personal assets is one way to demonstrate corporate formalities are being observed.  If the business is sued or has to pay a debt, the business entity formation means the owner’s personal assets are not at risk, unless the corporate veil is pierced.

Piercing the Corporate Veil

No matter what, the business still has to operate ethically and in accordance with the laws.  If not, the entity is disregarded for legal purposes. That means all of the business entity protections are unavailable, and the owner’s personal assets are exposed. This tends to happen when business owners either:

  • don’t observe the formalities of separating business and personal assets;
  • they defraud or mislead their customers or creditors;
  • taxes aren’t paid on time; or
  • business owner signs a personal guarantee (very common for commercial real estate leases and franchises)

This post originally appeared on Hire Effect™ : https://hireeffect.com/index.php/2019/02/01/protect-your-business/


Disclaimer:

This article does not create an attorney-client relationship. This article is for general education purposes only and is not legal advice. You should consult with a qualified attorney before you rely on this information.