Whether you are launching a new business, growing an existing one, or planning your exit strategy, creating and maintaining certain legal documents is essential to any good outcome. Here we will examine some of the legal documents your business must have and explain their importance.
Essential Legal Documents
Certain documents are essential to operate your business legally and without hassle. These are:
Business license – Depending on the city, state, or county your business is located in, you may need to obtain a general business license to run it. This is a document issued by a government agency granting permission to operate your business in the geographic area that that agency administers.
Your company may need special permits or licenses as well. A common example is obtaining a liquor license. It’s possible to run a restaurant without a liquor license, although it’s harder to turn a profit. Serving liquor without a license, however, opens the restaurant up to the possibility of fines, fees, license revocation, or a lawsuit.
Many types of businesses, from medical to plumbing, require their employees to be licensed or certified in order to do their jobs. You should have copies of these documents in case you need to present them. Research what permit and licensing requirements your state, county, or city requires in order to operate your type of business.
Business registration – You will have to register your business according to the way you plan to structure it, whether sole proprietorship, LLC, C corporation, or partnership. There are pros and cons to each type of business structure. Consult a business attorney if you would like advice on which type of structure would be best for your business.
Operating agreement or company bylaws – The type of business structure you choose will dictate the type. You may not be legally required to have either of these, but it’s still very wise to determine and document your company’s ownership structure and policies. This will help you avoid or resolve conflicts within company leadership and with your employees. When it comes to family businesses, it also protects those important relationships.
Ownership/partnership agreement – This document clearly outlines the important elements of your company ownership or partnership, including what percentage each partner owns, how profits and losses are divided, and what the roles and responsibilities of each partner are. This document should provide clear guidelines on how to broker disputes between owners and what will happen if one owner leaves the business.
A buy-sell agreement is extremely helpful for protecting the company and the owner’s interests if that does happen. It is a binding contract between owners of a business that controls when they can sell their interests in the business, who can buy an owner’s interest, and what price will be paid for it.
Intellectual property licenses – This would include patents, copyrights, trademarks, and software licenses. These are necessary to protect the ownership of any intellectual property the company produces or mark the permission the company has obtained to use someone else’s intellectual property.
Contracts – There are a wide variety of contracts that companies use to document legal agreements they make with customers, clients, vendors, employees, private contractors, and others. These should be scrupulously maintained so they can be consulted to provide clarification if a problem arises. If you intend to someday sell your business, these contracts will help determine your company’s valuation.
Non-disclosure agreements – An NDA protects the privacy of any sensitive information about the company or a client of the company. Many businesses, especially those dealing with financial information, must have these to operate freely while maintaining trust with clients.
Miscellaneous documents – These would include things like corporate minutes, banking documents, and tax documents.
Legal Documents Made Simple?
All of the above are examples of legal documents that your company may need to have or create. Unfortunately, determining the legal requirements your business must meet may not be straightforward, and they can change over time. There are so many different documents that maintaining the proper ones – or even determining which ones your company needs – can seem daunting. If you need help with this issue, Prometis Partners is here to advise you. Contact us today with any business questions or concerns you have.