As the areas covered by my practice are business and estate planning, I try to be especially sensitive and counsel my clients about keeping the documents in both these areas of their lives “harmonious”. For example, in terms of succession planning for a business owner, a will or trust should not conflict with an LLC’s operating agreement or the bylaws of a corporation. It is good to conduct a periodic review of such documents to make sure that the same plan is being followed.
I have also noticed more and more commercial lease agreements containing prohibitions against assignment and subletting which, if the tenant is a business entity, consider any transfer of ownership in the business as an assignment. First, we are all used to the usual procedure of the commercial landlord presenting the lease agreement which is prohibitively one sided and displaying a “take it or leave it attitude”. Business owners should know that all provisions are negotiable and that if a landlord does not want to partake in reasonable negotiations, that should be a precursor to what kind of landlord you may be going into business with.
When a commercial landlord tells a prospective tenant that it can not have any transfer of ownership without approval, that landlord is injecting itself into the internal business of the tenant and may seriously impede the business’s opportunity for obtaining investment needed for growth. Commercial leases typically run for about five to ten years. At the very least, the prohibition against the transfer of an interest in a business should be limited to the transfer of a majority interest. In that manner, the Landlord will still be dealing with the same principals of the business as it had before and the business will still be able to sell shares of its business provided they do not change management.
Be aware of all the ramifications of each provision before signing a commercial lease agreement which can impact your business for several years. For more information Email our Office.