When starting a new business, you may opt to rent out a building or a commercial space, rather than buying it. This gives you less debt if your business does not work out and typically costs far less up front. Most young businesses have a very strict budget and little or no income, so it’s important to know how to get your idea off of the ground in an affordable manner.
If you do rent out a space, read your lease agreement very carefully. Make sure you know exactly what is allowed, especially if things do not work out financially. Here are some important questions to ask:
Can you sublease part of your space?
If you realize you cannot afford the space on your own, are you allowed to sublease to another business owner? Can you share the space? Doing so, and working together to pay the rent, may make it affordable again.
Can your landlord collect rent for the entire lease, even if your business folds?
Say you sign a two-year lease, but your company folds after 12 months. Can your landlord just collect on any missed rent payments while you were technically still in business, or can he or she also collect on those 12 months remaining on the lease, no matter how your company is doing?
Can you change to a new location?
Perhaps the landlord has multiple properties within the same complex. If the rent in yours ends up being more than you can afford, can you ask to switch to a smaller space with lower rent? How do you go about canceling your current lease and signing a new one?
Starting a business is exciting, but it’s not something you want to rush through. Always make sure you understand your rights and legal options.