The Legal Summer Reading List Part 2: Business Documents
As we continue our legal summer reading series, this month we delve into documents important for your business.
Corporate Formation Documents
What is it?
The corporate entity formation documents include the filing receipt, articles of incorporation or, bylaws, operating agreements (LLC), proof of publication, shareholder or partnership agreements, buy-sell agreements and more, depending on the type of business. They are proof that you formed the business entity, and in the case of your shares of stock or your operating agreement, proof that you own that business. Your operating agreement (LLC) or shareholder agreement (corporation) governs the operations of the company and your relationship with your business partner.
Why do I need it?
So many reasons. These documents are necessary for opening up a bank account or obtaining a line of credit. If you are in the business of buying or selling real estate, you will need to provide the documents to the title company involved. Often, if you wish to lease a machine, the financing company will require a copy of the various documents. If you want to purchase or sell the assets of the entity, they need to be produced. If you are operating on a handshake with your business partner, and the relationship goes south, you may wish that you had a document that dictates how and when the parties get paid.
What else should I know?
Setting up a corporation or a company is more than filing the necessary papers with the Secretary of State. Most people will get a blank corporate “book” after the entity is formed, and just leave it on a shelf collecting dust, until they need it. I set up my clients’ corporate books, draft shareholders (or operating) agreements, and by-laws, prepare all the initial meeting forms, issue stock, obtain your tax ID number, etc. If you don’t have these papers, we can obtain them from the Secretary of State (for a fee!) – but we can also help you set up your corporation or LLC properly, so it’s all there when you do need it.
Business Employment Policies and Contracts
What are they?
Most businesses with employees should have an employee handbook outlining the important things affecting the employee-employer relationship. You should revisit any policies to keep up with the changing world re: Covid, remote working, etc. There are various governmental regulations, as well, that require you to implement policies regarding discrimination and harassment. If you work with sensitive or confidential information, you should consider a non-disclosure and confidentiality agreement with your staff. If you have a key employee, you may want to have an employment contract with them. If you have a business partner, you should consider a buy-sell agreement to spell out how to handle death, disability or retirement.
Why do I need it?
Many of the things you didn’t need to consider in the past have changed. You might never have had employees working at home, using their own devices, taking lunch breaks. You might not have had a hybrid environment where some people are in the office and others aren’t. You need to think about policies on vaccination requirements and other Covid-related policies ongoing.
What else should I know?
If you plan ahead, you won’t have to scramble later. Get things in writing and get them out to your team to ensure everyone is on the same page.
Document Retention Policy
What is it?
This is a policy on how your company handles documents, both print and digital, including how long you keep them, how you store them online, how you destroy them, etc.
Why do I need it?
It saves time and money in the long run. No need to keep tons of files once the time has expired and it’s easy to find files and documents when you need them. Ensure access for the right people. Plus, it is for safety, so someone isn’t tossing classified data into the trash without shredding it first because they didn’t have any guidelines. A company can get in big [read – expensive] trouble if confidential information is breached.
What else should I know?
Certain documents are required legally to be retained for specific amounts of time. Know the specifics of your industry.
Insurance Policies
What are they?
You may have insurance for various reasons. Attorneys and other professionals have liability insurance for malpractice. Most business owners have a “BOP” – business owners liability policy – that covers premises liability, theft, etc. for their business premises (if you don’t you really should – it costs less than $500 a year). Errors and omissions. Cyber liability. Auto policies. They are all important based on your type of business.
Why do I need them?
Protection and security!!!
What else should I know?
You should review your policies with your agent every couple of years to make sure you are covered properly. Policies change and each year the insurance industry excludes things or limits your policies in some way. Make sure you are covered!
If any of the above need to be on your list for this summer, call me. Sugarman Law is here to protect you and your assets.
