Every business owner often overlooks these fundamental documents that when not addressed can open the door to significant disruption and legal issues!
Review the documents below and ask yourself:
1) Do I have this in place?
2) Are they sufficient to protect my interests?
An OPERATING AGREEMENT is a document that should lay out the ground rules for the owners (or partners) in LLC's and Partnerships.
The following are things you should consider including in your Operating Agreement:
1. Profit and Loss Sharing
2. Who has authority to do what in your business
3. How do you add or remove owners or partners
4. Who can contract, lend, pledge, or encumber business assets
5. Should spouses have community property interests in your business
6. Are individual owners allowed to take part in opportunities without bringing them to the company first
7. Will voting be required
8. What tie-breakers will you use if people disagree
9. How will you wrap up the business in case of an early exit
EMPLOYEE CONTRACTS can be hiring/firing documents, training documents, and employment policies/manuals.
The following are things you should consider including in your Employee Contracts:
1. Authorization to do Background Check, Drug Testing, or Talk to References
2. Outline Role & Responsibilities
3. Acknowledge Workplace Training and Agreement to Follow Training
4. Acknowledgment of Hazards in the Workplace
5. Acknowledgement of Employment Policies/Receipt of Manual
6. Signed Write-Up for Violation of Employment Policies
7. Signed Termination Document
CUSTOMER CONTRACTS can be any document that your customer must agree to in order to receive your product or service.
The following are things you should consider including in your Customer Contracts:
1. Billing and Payment Language Should Minimize Chance of Collections
2. Refund and Exchange Policy
3. Order of Operations for Customer to Receive Product or Service
4. How will Disputes be Heard and Dealt With
5. Refund, Exchange, or Cancellation Policies
6. Identify What Documents Make Up the Whole Contract
7. Identify How Verbal Agreements or Clarifications Affect Contract
8. Design Contract to Make Potential Disputes Resolve in Your Favor
9. Clarify Choice of Law, Venue, and Jurisdiction in case of Lawsuits
VENDOR CONTRACTS are contracts you negotiate with your suppliers or other businesses in order to be able to offer your product or services.
The following are things you should consider including in your Vendor Contracts:
1. Are you able to negotiate the contract (Internet companies - most likely no; Everyone else - most likely yes)
2. How can you make the contract more equitable, as in fair, or not heavily favoring the vendor
3. If they are the only supplier you know of, what can you do to find alternatives
4. Can you live with the terms that aren't negotiable
ESTATE PLANNING is planning for your family, property, finances, and medical decisions should people need to act on your behalf if you become incapacitated or aren't able to communicate your wishes for whatever reason.
The following are things you should consider including in your Estate Planning:
1. Do you want the person who acts on your behalf to have to go through the expense and delay of court to be authorized to carry out your wishes
2. Who should be authorized to make financial decisions on your behalf
3. Who should be authorized to make medical decisions on your behalf
4. How will you communicate your wishes to these people ahead of time so they know how to act on your behalf
5. Have you spoken to your banks, doctors, or insurers to know if they will accept you authorizations for others to act on your behalf or whether they will require further documentation
6. Do you have the necessary Financial and Medical Powers of Attorney
7. Do you know the difference between Will-based planning and Trust-based planning
8. How will you prevent people from challenging your wishes
LEASES are contracts for buildings, office space, equipment, or property.
The following are things you should consider including in your Leases:
1. Are you able to negotiate the contract
2. How can you make the contract more equitable, as in fair, or not heavily favoring the landlord or equipment provider
3. If you needed to get out of your lease because your business did not work out, can you get early termination clauses added in
4. If a weather event, pandemic, or anything else interrupted your ability to enjoy your lease, can you get out of it
5. How will insurance for the building be covered
6. How will insurance for your property within the building be covered
7. Can you live with the terms that aren't negotiable