Legal Considerations for Business Growth

Published in Orchard and Vine Magazine on: October 1, 2014

As the summer season winds down it is important to look back on the season in terms of positives and areas for improvements. For those of you in the orchard and vine industry, it is a chance to look for ways to grow your business in the off season in the hopes of increased returns next year. For some this means an actual growth in the production level or providing new services; for others this means expanding clientele or decreasing expenses.

In order for any business to be successful, the money coming in must be more than the money going out. This seems simple enough in theory, but businesses and entrepreneurs throughout time can attest to it being a bit more complicated in practice. As the time for harvest comes to an end and business begins to slow, it is important to look for ways to improve and grow your business, to see what can be enhanced and what new projects can be implemented in the upcoming year.

Perhaps, as an orchardist, you intend to sell your produce at a new farmer’s market or add some value-added products to your farm gate such as dried fruit or canned jam.  Maybe you are considering planting some additional trees or vines to expand your crop.  Perhaps, as a winery, you are thinking about expanding your reach with the creation of a wine club. Or, you are going to try to reduce your marketing expenses by focusing on social media.  All of these avenues can lead down the road of success.

As you are considering new options for growth, it is important to analyze the current legal structure of your business as well as identify potential risks stemming from your growth opportunity and, if necessary, how to minimize those risks with insurance. Maybe you are a viticulture consultant who operates as a sole proprietorship which you feel has little or no risk of liability and, frankly, do not want to deal with the complexity of incorporation. Perhaps you and your spouse currently sell the fruit grown on your farm at local markets and operate as a general partnership because you are engaged in a lower risk venture and want to benefit from deducting a portion of your business losses from other sources of income.

While your current structure may be working well for your business, the growth of your business may demand a new type of structure.  For example, if you are planning on expanding your tasting room or building a small roadside marketplace of your property, you will want to consider the options of a limited partnership which would allow for financial investments by “passive” partners or equity financing which means that you would incorporate your business and obtain financing by issuing shares. If you believe undertaking a business venture with another person for a specific project is a positive step for business growth and development, you should consider a joint venture, which is a legal arrangement in which two or more parties combine their expertise, services, investments and other resources for a specified purpose, usually for a limited time. Now is a great time to discuss these matters with your legal advisor.

Some growth strategies result in increased business risks which may lead to legal claims and liability. While incorporation minimizes the risk of liability, insurance remains an important protection for any business. When expanding your business, you need to ensure that your insurance coverage continues to cover your new growth strategies. When determining your business’ insurance needs, it is essential to speak to a licenced broker and select the policy right for you and your needs.

 

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