With 2015 upon her, Cinda Bossey is making her action item list for her business, Bossey Boots. Although the bulk of her time and efforts are spent on getting the business running and generating revenue, occasionally she asks herself whether she has cleared all of the necessary legal hurdles. What should Bossey ask her attorney?
When the calendar turns the page to a new year, many people reflect on what happened in the last year and create a list of tasks designed to improve their business in the upcoming year. Several years ago Jamie Ribman, who used to write for Tilting, published a similar New Year’s article. We wanted to remind you of those and some additional legal resolutions to help get your business off to a fast start in 2015.
Whether you just started a new business, or you’ve been in business for a long time, it is important to make sure you establish an entity for your business and not operate as a sole proprietorship. Running your business through an entity may provide tax advantages, and can also help limit your liability.
Review and Update Corporate Documents
As Jamie pointed in his article, reviewing your corporate documents is like getting your annual physical – no one likes it, but a checkup can be a good thing. Several things may have changed in your business during the past year:
- You changed locations
- You added or lost a partner
- You elected new officers or directors
- New tax laws
Take the time to go over your corporate documents with your attorney to make sure everything is in order.
If you own the business with other people, even if it is a spouse or other family member, it is very important to have a company agreement establishing each co-owner’s rights and obligations. As we have previously talked about on this blog, 50/50 business relationships can be fraught with problems. Having company agreements in place are very beneficial in the event there is a significant change in your personal life (such as death or divorce) or if you and your co-owners decide to go your separate ways.
Abraham Lincoln (who was an attorney) famously said, “He who represents himself has a fool for a client.” Many clients draft their own contracts to use with their customers, or borrow a form contract used by one of their competitors. Most business litigation disputes involve contracts that were drafted and negotiated by parties who did not involve an attorney. If you have just formed your business, use an attorney to help you draft a solid form contract. If you are an existing business, it is always good to have your contract reviewed annually so that it can be updated based on any changes in the law. The old adage penny wise, pound foolish applies here: it is better to spend a little bit of money to have your attorney prepare or review a proposed contract than to pay that same attorney a lot of money to litigate over that same contract.
If you have employees, it is important to have a handbook that sets forth company policies to protect your business from liability. You want to make sure that your handbook is tailored to your business. And like your corporate documents, you want to make sure your handbook is reviewed each year and updated to reflect any changes in the law. And depending on what type of business you are in, you may want to consider having certain employees sign non-compete and non-solicitation agreements. Our colleague Michael Kelsheimer recently wrote a great blog article on employee handbooks, and I recommend you review it.
We hope that 2015 is a joyful and prosperous year for you and your business!