Our concern always at Patterson Tabert Law Offices is to assure that our clients understand proper business and corporate procedures to prevent possible legal problems from happening. As a result, we focus here on Business Check-Up Matters for corporations and limited liability companies. We would like to remind business owners of on-going legal issues in their business, and how to minimize legal risks.
Company Formalities
Whether your business is a corporation or a limited liability company, you should remember to treat your company as a company. Not only do company formalities show that the company is not just an alter ego of the individual owners (reducing the chance of “piercing the veil”), but they also promote good communication between owners and persons involved in daily operations. Many company disputes involve poor communication between the owners of the company and the persons involved in the daily operations.
Annual Meetings. The owners of the company should have meetings every year (check your bylaws or operating agreement for the specific date) to review the actions of the year and plan for the next. Often, it is extremely easy to get caught up in the day-to-day operations and forget about the long-term goals of the business. Annual meetings provide the opportunity for you to re-evaluate your business operations and long-term goals and plan for new ways to achieve them.
Minutes and Resolutions. Make sure all important transactions of the company are considered and approved by formal action of the directors, shareholders, managers, or members, usually in the form of a resolution approved either at a meeting or by written consent. Again, good communication between owners and persons involved in the daily operations reduces the chance of future conflicts. The following transactions should be discussed and approved by the directors, shareholders, managers, or members:
1. Major Business Agreements;
2. Loans;
3. Employment Agreements;
4. Real Estate Purchases and Leases; and
5. Buy-Sell Agreements.
The Company’s Record Book. When you began your business, you may have purchased a beautiful leather record book, with your company’s name embossed in gold on the spine. . . or you may have assembled your documents in a white plastic three-ring binder. Don’t judge the book by the cover—it’s what’s inside that counts. Make sure you keep the following documents updated in your company’s record book:
1. Minutes;
2. Resolutions; and
3. Stock Ledger/Membership Interest.
Company Contracts
When the company enters into an agreement with an employee, customer, vendor, supplier, etc., it is extremely important to have a written contract explaining the rights and responsibilities of each party.
1. Develop policies, procedures, plans, and agreements concerning employees and independent contractors.
2. Sign employment or independent contractor contracts.
3. Make sure you have signed appropriate confidentiality and non-competition agreements with employees and business partners with whom you disclose important business information.
4. Review or sign contracts with suppliers, vendors, distributors, customers, or other business partners
If you are going to lease space for your business, make sure to have a contract. Calendar renewal dates in advance so you can:
1. Determine whether you want to stay at that location.
2. Look for alternate locations prior to your lease expiration.
3. Sign the renewal on time or move to a new location by the end of your lease term.
Miscellaneous Matters
Intellectual Property: If your company has intellectual property which is important to the business, make sure to register, license, and monitor the trademarks, copyrights, or patents. You should also calendar renewal dates for registrations and expiring licenses.
Domain Names: Avoid the potential disruption in business, the legal battle, or the cost of purchasing your company’s domain name from a cyber squatter. Calendar renewal dates for domain names to ensure that you renew the company’s domain name on time.
Advertising: Review advertising and marketing methods for appropriate intellectual property identification and to ensure compliance with laws (eg. Sweepstakes and contests laws).
Growth: Plan and implement the expansion of the business through additional outlets, business acquisitions, distributorships, or franchising.
Transition Planning: Plan your exit strategy early. Evaluate your competition and key employees who may be willing to purchase the business.
The matters discussed above are for general reference. Your business most likely has additional, unique matters to be evaluated. If you have questions about business matters for your unique situation, we welcome your inquiry.