space

4. INITIAL OPERATIONS

a. Office and Equipment

Office Lease

Many entrepreneurs work in an office away from home. An office provides various benefits such as increased productivity, ease of calculating business expenses, impressive location for meetings, work-life balance, and interactions with other professionals.

If you decide to rent an office, you should execute a written lease agreement with the landlord. At a minimum, the lease should include the following provisions:

• description of leased premises (including access to common areas)
• division of responsibility for utilities
• other incidental services
• rent amount and payment terms
• security deposit
• term (period) of lease
• renewal and termination provisions
• landlord's policies regarding the use of the premises
• indemnification from claims of third parties

Try to use your own version of the lease instead of a version provided by the landlord. If necessary, use the landlord's version but negotiate changes in your favor. In either case, consider consulting with an attorney.

Equipment Agreements

Once you have an office, you'll need to fill it with equipment. Start with basic furniture, computer equipment, and a telephone. You can either lease or buy. In either case, you should execute a written agreement with the lessor or seller.

If you lease, the lease agreement should include the following provisions, among others:

• description of leased equipment
• maintenance duties and warranties
• lease amount and payment terms
• term (period) of lease
• renewal and termination provisions
• indemnification from claims of third parties

If you buy, the purchase agreement should include the following provisions, among others:

• description of purchased equipment
• warranties
• sales price and payment terms
• return policy and refund rights
• indemnification from claims of third parties

When planning your office, remember that many businesses fail within their first year of operations due to a lack of capital. Thus, try to control your expenditures and debt. You can always expand later, once your revenue justifies the additional expenses.