Corporate agreements are some of the most important documents your company will deal with. Once you have your business formed, there is a constant process of building the business and making sure that your documents are in order. In many states, there are yearly filings for the business that needs to be done. You also likely need to have an annual meeting. For larger business decisions, you may need a board of directors meeting and corporate resolutions. As more news continues to trickle out about Tony Hsieh and his estate, I wonder what condition his corporations are in. And I’m not referring to Zappos – that’s a large company, acquired by Amazon, and is likely properly set up and documents. Rather, the articles about Hsieh discuss how he owned a variety of real estate through a series of LLC’s. What’s absent from all these articles is whether those LLC’s have the proper corporate agreements in place. Hsieh died without a will. He apparently left sticky notes all over his house with possible financial ramifications. But what about those LLC’s?
Corporate Agreements for Your Business
When you started your business, you knew you needed corporate agreements. Maybe you used one of those online websites and after the initial filings, you were left with a packet of blank documents to fill out. Even more dangerous are the sites that simply “mail merge” your information into an agreement. Then you are told to simply sign the documents and you’re all set. This is the ultimate insult to your business – you are just a generic form to them. There’s no personalization for you and your business. But then again, you get what you pay for on those sites.
Depending on the type of business you have formed, you may need
- Operating Agreement
- Partnership Agreement
- Shareholder Agreement
- Corporate Meeting Minutes
- Corporate Resolutions
(In addition to the corporate agreements, don’t forget you’ll also need to get an Employer Identification Number for the business – Form SS-4)
What Happens if I Don’t Have These Documents?
If you don’t have these documents yet, you’re not alone. I’ve had many initial meetings with clients who sheepishly admit they didn’t do any corporate agreements. Some of them even spent time and money on another attorney to have them drafted up, but never signed them. For every company, there’s a story as to why they don’t have their documents in order. The good news is, regardless of where you are in the process, you can still get these documents prepared.
The main risk of not having the documents is a loss of control. It’s your company. Presumably, you realize that controlling the company and its future is one of your main obligations. But if you don’t have the right documents in place, you don’t have that control. Instead, the laws of the state where your company is organized control your company. If there’s a dispute between owners? A court makes the decision, not you. If you want to buy out one of the other shareholders? There’s a process set out by your legislators that you’ll have to follow. Instead of you and your other owners being able to set up processes and procedures that you control and guide, you’ll need to look to your local laws.
Many times, this doesn’t seem like a big deal. Things are going fine at your business. You don’t need to worry about these kinds of things. This may be the case until you do need to worry about these things. Then you’ll be cursing the fact that you don’t have a time machine and can’t travel back in time to get those corporate agreements completed.
It’s Not A Complex Process
Creating these documents does not need to be a complex process. But, like snowflakes, your business is yours. It’s unique. A cookie-cutter form, mail merged on a website, doesn’t know or care about you and your business. So rather than ignore them, speak to a professional about the right documents for your business.
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- Corporate Resolutions: What Are They? Does Your Business Have Them?
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- Setting Up An LLC: There’s Plenty Of Time Left In 2020…
If you are thinking of starting a business or already started your business and want to make sure your legal documents are in order, give me a call and we can set up a Legal Strategy Session to discuss the process and what documents would be best tailored for your company – (877) AMAYERS.