Take time to put your legal documents in order before opening your business. Freeing yourself of preventable roadblocks lets you focus on the adventure ahead.
Starting a new business is exciting. You’re ready to open the storefront or virtual doors and share your expertise. A business owner, though, needs to take care of legal considerations before the first customer steps in. Read below about the documents needed to give your business a successful beginning.
Business Plan
Most businesses owners need to seek out financing to get off the ground. Investors want to see what you have planned so they can make an informed decision. Tell investors about your products or services, supplies you need, your target market and risks involved. In other words, explain why you need the money, what you will do with it and how you will earn it back.
Besides serving as a resource for investors, a business plan is a tool for you to draft how to handle key details like hiring employees, handling ASC 606 compliance or taking on partners if your business grows.
LLC Operating Agreement
Setting up a limited liability company, or LLC, limits your personal obligation to business debts as well as offering advantages regarding tax, accounting and cash flow. Unlike a corporation, an LLC can be formed by an individual.
Employment Agreement
If your business hires employees, the employment agreement allows them to understand terms up front. It explains wages, benefits, termination policies and responsibilities, among other things. While it may be tempting to hire someone on an oral agreement, especially a friend or family member, a written agreement will prevent unclear communication.
Handbook for Employees
Like an employment agreement, an employee handbook provides workers with a document that clearly explains your policies, as well as employees’ rights as mandated by federal and state laws. The handbook should include details on such topics as compensation, work schedule, vacation and leave, anti-discrimination and harassment policies, safety and security measures and standards of conduct. A thorough employee handbook can prevent misunderstandings leading to lawsuits.
Confidentiality Agreement
Your business may offer a product or service that is proprietary. A confidentiality agreement, or non-disclosure agreement, protects your intellectual property from competitors. Put your confidentiality expectations in writing so employees will understand their responsibilities when given private information. If the need arises, you can sue the employee for any breach of information.
Non-Compete Agreement
In the same vein of a non-disclosure agreement, a non-compete agreement protects proprietary information. A non-compete agreement states that a person leaving your employment is restricted from working for a competing business in a certain geographical area for a specified length of time. Rules for deciding whether such an agreement is valid and reasonable vary from state to state. Check with an employment-law attorney if you have questions.
Privacy Policy/Terms of Service
Most people are familiar with terms of service/privacy policies from using software or websites. Users are asked to read the terms of service and agree or disagree to the terms stated, usually by checking a box. You need to have a terms of service/privacy policy if your customers supply personal information, such as an address or credit card number. This policy also protects you against misuse of your website.
Partnership Agreement
If you’re entering into business with a partner, both parties need to understand their roles as owners. Again, it may be tempting to enter into an oral agreement with a trusted person, but a written partnership agreement prevents legal disputes. The agreement clarifies the roles of each partner, contributions expected, the partnership’s duration and how new partners may be added. A partnership agreement also details what to do if one of the partners exits the partnership.
Buy/Sell Agreement
A buy/sell agreement spells out what happens if a partner can no longer perform duties because of injury, bankruptcy, death or other circumstances. A buy/sell agreement creates a way for other partners to buy out the existing partner’s share or consider any heirs involved.
Take time to put your legal documents in order before opening your business. Freeing yourself of preventable roadblocks lets you focus on the adventure ahead.
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