You have the opportunity to open a physical location for your business. How exciting! We hate to play Debbie Downer, but when making significant decisions like this, you must consider what can happen in the worst-case scenario. This is prudent and necessary as a business owner. One of the factors you need to consider is potential liability for your business and you personally. Think before you act!
Before you sign that lease, you should know the answers to these questions: What is the lease term? Do you have to sign a personal guarantee? Is the landlord willing to offer an early termination or kick-out option?
Often, a landlord does not leave startups or business owners opening their first shop with much room for negotiation. Yet, the answers to these questions are very important. If you have to sign a personal guarantee for a long-term lease, what will happen if there is an ebb in business and you cannot pay the rent? What if it is no longer feasible to operate that location? You will be responsible for any back rent you owe and the landlord can bring suit against you to recover the rent you would have been responsible for during the rest of the lease term! This can expose your personal assets- including your home! And even if you do not have to sign a personal guarantee, a judgment of this magnitude against your business can be devastating! Please do not take this for granted- we have represented a variety of business owners who found themselves in this very situation.
You MUST have the terms of your lease reviewed before signing it; if for no other reason, so that you fully understand the implications. Know what you are getting yourself into! Contact C&G today!!
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