Month: December 2013

Location, Location, Location…and Zoning

Location is critical to the success of your business. You probably already know to consider visibility, convenience, and traffic patterns when deciding where to locate. But you may not know there’s another element to consider: zoning. Zoning laws limit the ways you can use property located in that area.

Zoning laws have gotten much more complicated that just separating housing from businesses. Many cities now restrict the types of businesses that can go in a particular area and those restrictions aren’t always obvious (for example, some cities treat churches as “residential” uses). Zoning laws also now include additional requirements: signage, parking, visual appearance, and even limiting the number of businesses.

Fortunately, there are three things you can do to protect yourself from running afoul of the zoning laws:

1. Do your homework! Always check the zoning for a property before you buy or lease it. Some cities will agree to change zoning, but in those cases its best to make the sale or lease contingent on the zoning change going through.

2. Be nice to your neighbors—cities usually wait until a neighbor complains before pursuing violations. Building good relationships with your neighbors gives them less reason to complain.

3. Never rely on how the previous owner used the property—just because the previous owner used the property for a particular business doesn’t mean you can. The previous owner might have been grandfathered in (the business existed before the zoning law) or no one challenged its existence.

Remember, fighting zoning laws can be difficult and expensive. On top of that, cities usually have quite a bit of leeway to make and enforce zoning laws. Instead of fighting them, plan ahead to find the perfect location for your business that has the right zoning.

What to Know before you Join an LLC

Joining an LLC as a new member can be a great professional opportunity. But with all the excitement, many people forget to take a serious look at what they’re signing up for. Part of the reason is that each LLC is different – LLCs are controlled mainly by the Operating Agreement written by existing members. Here are the four things everyone must know before they join an LLC.

1. You can’t just “quit” an LLC like you can a job.

Some LLCs might offer you a membership interest instead of hiring you as an employee. There are certainly advantages to this, but one disadvantage is that it’s much harder to dissociate from the LLC as a member than it is to quit as an employee.

2. Not all members play the same role.

If you want to play an active role in running the business, make sure you’re joining as a managing member and the Operating Agreement spells out your decision-making ability. Passive members simply provide funds and sit back.

3. Membership interests are not created equal.

Some members may (and often do) have a larger percentage than the others. They might have more say in running the company or be entitled to a bigger percentage of profits. Make sure the percentage you’re being offered is sufficient for what you want to get out of the opportunity.

4. Contributions.

Joining an LLC requires you to make an initial capital contribution (usually), but many people don’t realize they can be on the hook for additional contributions down the road. Failing to make these “capital calls” could lead to dilution of your ownership, losing your interest entirely, or lawsuits.

Fortunately, all of these concerns should be addressed in an LLC’s Operating Agreement. Taking a little time to review the Operating Agreement with an experienced business attorney can help you figure out if becoming a member is a good opportunity for you.