A Legal Tune-Up for your Business
ITIPress.org - Gerald S. Duty / Attorney
Those of us who are small business owners, in the midst of our daily
routines and our countless responsibilities, such as satisfying clients,
paying the bills and opening new markets, we do not often realize that our
business is craving a legal “tune-up.” Herein you will find various legal
issues which should be reviewed from time to time. Doing such should
assist you in reaching your business goals more efficiently and in
protecting your business from common dangers.
Employment Agreements. Generally speaking, many small businesses, when
they first open their doors, have a strong nucleus of employees dedicated
to the business. As they expand and grow, most companies find they begin
hiring workers that necessarily have less commitment and interest in the
success of the business. As such, it is important that each employee know
what is expected of him or her and what the consequences are of not
complying with such expectations. An employee manual, along with other
employment documents can set the tone of the workplace atmosphere and help
avoid employment disputes ending up in court. Most businesses should have
an employee manual that creates standards and avoids employment-related
legal problems. At the same time, such a manual should take precautions to
not create responsibilities for the employer that it cannot fully
Preparing a Business for Its Sale. Taking time to plan for an eventual
sale of a business gives the owners more leverage in negotiations and
facilitates the experience. Adequate preparations may increase the offer
amount the business is able to attract, assist the owners in obtaining
better legal and business terms and minimize the amount of taxes paid in
an eventual sale. Even for those who are not actively planning to sell
their businesses, it is beneficial to plan as sometimes offers arrive that
make one reconsider his or her plans.
The Assets. In some cases, it is beneficial to separate the assets from
the operations of a business, placing each into different entities. Such
helps protect the assets of a business from unforeseen liabilities and may
create opportunities to open new business relationships.
The Contracts. Many times, a company negotiates an important contract, the
business relationship flourishes and both parties continue to provide
services after the contract term expires without negotiating an extension.
A review of a company’s contracts may avoid future disputes and create
opportunities for negotiating better terms for contract extensions.
Buy-Sell Agreements. It is important to clarify the way in which a
shareholder may transfer or sell his or her shares in the company in the
case of unforeseen circumstances, such as death, illness or retirement.
Such an agreement should protect a company, for example, from a
shareholder who wishes to sell his shares to a competitor. Without such an
agreement, a shareholder may one day find himself the partner of family
members of a recently deceased shareholder or member. It is better to
consider such possibilities before the unexpected occurs.
The Owners. Many small businesses have not adequately documented the
relationship between the shareholders, partners or members. Sometimes such
businesses have not issued share certificates. Due to the frequency of
partnership disagreements that turn into lawsuits, it is advisable to
document all the terms of these relationships. Such details are also
necessary in order to sell or otherwise successfully take the company to
the next level.
Expansion of the Business. Sometimes the business that one starts, over
time and with new opportunities, expands and evolves into a business of
broader scope than originally envisioned. In such cases, it makes sense to
reexamine the company’s structure and make changes to legally separate
distinct activities and assets from one another. This helps insulate each
activity and avoids negative occurrences in one part of the business from
affecting otherwise healthy aspects of the business.
Key Employees. The majority of businesses have a small number of key
employees. It is important to protect the company from the potential
damage such employees may cause. Many times such can be effected with the
use of non-compete and confidentiality agreements.
"The act of
taking the first step is what separates the winners from the losers." –