Important Business Documents for Every Company

By Natalie, MLF law clerk

If you are the owner of an LLC or Corporation, or you are thinking about starting one, there are several very important documents that you should have in order to operate your business effectively. For those of you who are just starting your business, there are a few documents that are required before you can start the process. Though LLC’s and Corporations differ, the information provided here will pertain to both for the most part.

Before you do anything, you will need to pick a name for your business and send in a document reserving the name if it’s available. Prior to deciding on a name, it is highly recommended that you perform a trademark search and a search on the Secretary of State website to see if the name is already in use by some other company.

The next step in the process for creating your entity is to file your Articles of Organization if you’re forming an LLC or Articles of Incorporation if you’re forming a Corporation. These will be required documents in order to establish your Company with the State in which you are applying. Some states may require more in-depth information about finances and employment, while others will not. Processing these documents will cost anywhere from $100 to $800. Though it can vary state to state, the general information needed includes:

Company Name
Address of Office
Mailing Address
Addresses and Names of anyone forming the LLC
Name and address of Registered Agent (“This is the individual or business responsible for accepting service of process and doesn’t necessarily have to be an owner or director. The registered agent must also provide a statement of consent to being appointed as the registered agent.”)
A statement regarding who will be managing of the company

Additional information that will need to be provided for a Corporation includes:

“Statement of purpose. You don’t have to be specific about what type of business your corporation will be engaged in. In fact, some states have this statement preprinted on the incorporation form. Unless you’re asked to be more specific, the Nolo legal website advises issuing a general statement along the lines of, ‘The purpose of the corporation is to engage in any lawful activity for which corporations may be incorporated in this state.’
The corporation’s duration. Although the purpose of this section is to say how long your corporation will operate, the most common answer will be “perpetual” since it’s difficult to provide a specific length of duration.
Number of shares and classes of stock the corporation is authorized to issue”

Once you’ve decided to proceed, there are a couple other documents that should be prepared at the time of, or even before, a business is formed including a Partnership Agreement, Operating Agreement or Shareholder Agreement.

A Partnership Agreement is suggested when you form an LLC with more than one owner. This agreement is not needed to legally form your company, but it is in the best interest of the partners to have a set of agreed upon terms for running the company. With a Partnership Agreement in place, future disputes can be mitigated and legal action that could become costly for the individuals or the company can be avoided. This agreement should include partner names, partnership duration, each partner’s initial contributions, expected division of duties, equity owned, how a new partner can be added, and what happens to the business in the event of a partner leaving. Without this agreement, partnerships can become muddled or complicated by events beyond your control.

For a Corporation, a Shareholder Agreement will hold a similar amount of weight as the Partnership Agreement does for LLCs. The Shareholder Agreement sets forth the rights and obligations of the shareholders and states when the shareholders can exercise these rights. A well drafted Shareholder Agreement can resolve conflicts among the shareholders, avoid costly litigation, foster trust and ensure that everyone is in agreement as to the goals and purpose of the corporation. Critical information in a Shareholder Agreement includes how profits are divided up, limits on the authority of the officers, how they will be chosen, and if shared can be transferred to others. These decisions will be essential to the future of your company and can help you avoid disputes or miscommunications in the future.

An Operating Agreement is paramount when forming an LLC. This document is also not required by most states, but will help establish the rules of your company and how it will operate long past its formation. It could also keep you from having future tax issues. This document can include details such as:

Members’ percentage interests in the LLC
Members’ rights and responsibilities
Members’ voting power
How profits/losses will be allocated
How the business will be managed
How members will be added
How to amend rules
Rules for holding meetings and taking votes
Provisions for buying and selling interests in the event that a member wants to sell, dies or becomes disabled.

Similarly, corporations are not legally required by any state to have an operating agreement, but experts advise owners of these businesses to create and execute their version of an operating agreement, called bylaws.

One last group of documents that you should have for your business is a record of your Meeting Minutes. Many states require corporations to record their meeting minutes so that there is a record of what happened or what was agreed on during important company meetings. These can settle later disputes. “It is important that the minutes are detailed as they serve as the corporation’s memory and can be relied upon in a court of law. It should reflect an official account of everything that was discussed, or which occurred at such meeting, including but not limit to the type of meeting, the time and place of the meeting, a detailed list of those who attended, a list of all actions taken, and a summary of any votes taken.” You should keep these records in a safe spot, so that they can be found and used in any future disputes or discussions.

Once you have established your company and are ready to start hiring, it is important to have an Employment Contract ready for them to sign before coming to work for you. Employment contracts are important because they set the terms and expectations of employment on both sides. This includes how much the employee will make, their benefits, hours, position, responsibilities, and any other expectations that can include non-compete clauses or termination notice periods. These agreements allow for negotiation on both sides and will help you protect yourself as well as protect the employee. If problems arise in the future, the employment agreement can be looked at to see if resolutions have already been set forth or agreed upon. An agreement like this should also be signed by independent contractors that you hire in order to ensure their duties and compensation are understood prior to their contracts beginning.

Though an Employment Contract can cover some aspects of this, your company should also have a Non-Disclosure Agreement ready for all employees, contractors, or business partnerships. NDAs will help protect any of your business’ proprietary information that is shared while conducting business with new people. By having an employee sign an NDA before they begin working for you, you are ensuring that they cannot and will not share trade secrets, client information, or any other aspects of your company that you wish to protect. If someone who has signed an NDA breaches that contract, you can sue them for the damages that they may have caused you or your company.

When you have employees, regardless of how large or small, running your business without policies and guidelines will be challenging. A well-written Employee Handbook can be extremely beneficial in communicating to your employees their rights and obligations as employees of your company. An employee handbook will provide written workplace dos and don’ts and help to establish the relationship between you and your employees. Business owners are also required to update their employees of certain rights and obligations as mandated by state and federal regulations. Having these communicated through an employee handbook can help you meet these obligations and avoid civil fees and penalties.

Lastly, with so much business being conducted online and through websites or mobile applications, terms of service and privacy policies are two of the most commonly prepared legal documents today. A terms of service policy, also referred to as a terms of use policy, is a set of terms by which a visitor can use your business’s website or mobile application. A privacy policy tells a user how you will use the data and information that is collected from them whenever they visit your website or use your mobile application.

There are three primary reasons, however not the only reasons, why you need to have a terms of service and privacy policy in place. (1) If you do not have a terms of service or privacy policy, you may not be able to get a payment gateway for your website or mobile application. As a result, you will not be able to accept payments online. (2) A privacy policy is crucial if you want users to feel comfortable using your website as majority of people will not want their information shared with others under any circumstances, so they need to trust your company in order to proceed with using your site or buying anything from you. (3) If you do not have terms of service or a privacy policy laid out, you as a business will not be able to take action against a user who misbehaves on your website, for example by hacking or posting offensive or abusive content on your site. Terms of Service and Privacy Policy provides you with overall trust and security.

Whether your business is large or small, a general partnership, a limited liability company, or a corporation, having the right legal documents in place when you start and while operating can be a huge advantage. Being prepared with the appropriate documents will allow you to comply with federal and state regulations, and avoid misunderstandings and disputes that can drain your business of its resources and lead to expensive lawsuits. The McHattie Law Firm can help you with all of your general corporate legal needs.

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