In our current economy, it seems every time I turn around a business is closing, and it is usually the small, independent business that is affected. One such business, a pizza carryout and delivery restaurant in my neighborhood, just closed and I couldn’t help feel saddened by this, and not just because my weekly pizza source has been cut off.  Even though this restaurant was not my client I couldn’t help but reflect on what they could have done differently from a legal perspective in order to keep their doors open.

First, when leasing a retail or office space negotiate a rent that has a lower rent initially with incremental increases for each subsequent year that way it allows you time to grow your business and as your business grows you will be able to handle an increased rent.  If the lease is a triple net lease (whereby you are required to pay a percentage share of operating expenses) the landlord should be able to give you an estimate of those costs based on the previous year’s expenses. That way you will be better able to budget your monthly expenses. Also, your attorney should be able to negotiate what is included (or excluded) in the operating expenses as sometimes the landlord includes everything last dime in the definition of common area maintenance expenses.

Of course, be careful not to expand too quickly. But if you are having problems staying current with your creditors, before rushing to declare bankruptcy, try negotiating a reduced or delayed payment schedule. Your creditors would much rather get paid than find themselves empty handed down the road.  There are attorneys that specialize in this area that may be able to assist you.

Hire wisely. Of course at some point, especially if you are a retail establishment, you will need to hire employees. Depending on your business you may be able to save some money by hiring contractors to start (especially if you only need help periodically). With contractors you don’t have to pay employment taxes which can take a large bite out of your budget. But a word of caution, tread carefully here and be sure to consult with your attorney first before hiring contractors over employees.

Finally, as an attorney who represents start ups and small businesses I always make sure to protect my clients as much as possible from personal liability. You may find yourself being asked to sign a personal guarantee, whether for leasing equipment or leasing space. While it is unlikely that a landlord will waive the guaranty you can negotiate a shorter guaranty period. For example, instead of the guaranty being tied to the term of the lease, negotiate a shorter period, such as one to two years.