Norton Law Corporation Presents a Post About the Business Documents Your Company, LLC, or Corporation Needs

7 Documents You Need to Keep Your Business Legally Sound

I’m always a little surprised when savvy business owners come to me to make sure their business is operating legally, only to find they’re missing a number of key documents. To be perfectly honest, a lot of the documents only matter if you’re in the process of expanding your business, going to sell your business, looking to take on investors, or you’re going to register your company’s securities with the SEC. But, that being said, if you want to save yourself a lot of headaches (and a lot of money having attorneys fix things that are horribly, horribly broken) before you take those steps towards growth and expansion, and if you want to protect you and your family’s interests in the most comprehensive way possible, it’s always a good idea to make sure your business’s documents are in order sooner rather than later. Without further ado, the documents you’ll need:

  1. Articles or Incorporation / Certificate of Incorporation / Articles of Organization: These documents have many names depending on where they’re being filed and what they’re being filed for, but they all have pretty much the same purpose—to let the Secretary of State (or the equivalent Division of Corporations) know your business is registered as a corporation or a limited liability company (LLC).

    If you’re incorporating your business in California, for example, you’ll need to draft and file the articles of incorporation. There’s a form, but if you hire a half-decent business attorney, they’ll draft you articles that actually apply directly to your business rather than shoehorning you into what the state’s template provides.

    The Certificate of Incorporation is the document you’ll need if you want to incorporate your business in Delaware. It’s very similar to what you might file here in California, with a few tweaks (and a different name). If you’re not sure whether you want to incorporate in Delaware or your home state (not necessarily California), I wrote a nice article on that a few months ago: Why Your Home State May Be the Best Place to Incorporate Your New Business.

    As for the Articles of Organization, that’s the document you’ll file in California to organize your business as an LLC. Of course, there’s also a form for that—and you generally have to use it.

  2. Bylaws / Operating Agreement: As with the documents above, these two documents have different names, but essentially do exactly the same thing. They help you determine the ground rules for how your business is run. Bylaws are used by a corporation (no matter what kind: C-Corp, S-Corp, B-Corp, etc.) to specify such issues as how large the board will be, where the initial office will be located, what powers the officers and directors have, how shares may be transferred, and how shareholders and directors can vote.

    Now, if you’re the sole shareholder of your own private corporation, you’re probably thinking why in the world would I want to spend a few hundred dollars on a document like this when what I say goes. And that’s a fair question, but here’s a fair answer: in some states, you have to submit your bylaws to the Secretary of State/Division of Corporations/Whatever they’re called in your state at the time time you register your corporation. Even if that’s not the case, some banks will want to see your bylaws before you open an account, the professional licensing organization of your state may want to see them if you’re running a professional corporation, investors will definitely want to see them before they send any money your way, and the buyer will want to see the bylaws when it comes time to sell your business.

    Oh, and if you’re passing your corporation on to your kids when you die, the bylaws can help them easily make the transition from your ownership to that of your kids without too many struggles (provided it’s drafted properly). And best of all, if you’re a sole shareholder of your company and you want to protect your family from liability if your company is ever sued, a set of bylaws can go a long way in proving your company is it’s own entity and not just your alter ego.

    For the purpose of this post, an operating agreement is practically the same as the bylaws, except they’re used for LLCs.

  3. Minutes from Meetings: You’re holding regular shareholder/director/member meetings, right? Right? Well, don’t feel too bad if you’re not. There’s a ton of small businesses out there where regular meetings means once every five years. But while you may not think that the minutes from your regular shareholder meetings are that important, in truth, they really can be.

    Here’s the thing. Imagine your business is going along smoothly when all of a sudden someone sues you for some screw up of one of your employees. Maybe they hit someone with the company car while they were en route to the job site. That person has a valid case and sues your company and you. Normally, if the company has caused some kind of wrong, all of the liability rests on them, but there’s a theory in the law called piercing the corporate veil which basically means that if the plaintiff (the person who’s suing you) can show that your company is no more than just your alter ego, they can go after your assets too to satisfy their judgment debt if they win. And here you thought forming a corporation or an LLC totally insulated you from liability.

    But how can you protect yourself from such an attack? Holding regular meetings and keeping records of them. It doesn’t matter if they’re shareholder meetings, board meetings, or member meetings (if you’re operating an LLC), just make sure you have them and make sure they’re properly documented.

  4. Trademark Registration Certificate: Strictly speaking, this isn’t required, but you should really get one. Seriously, you’ll save a lot of money down the road, especially if there’s already someone else using your trademark and you don’t know about it.

    No matter what kind of business you own, your brand is your most valuable asset. I’ve said it before, and I’ll say it again until I’m blue in the face.

    I don’t care if you’re a cruise ship operator with vessels that cost tens or hundreds of millions of dollars—your brand may be just that valuable. After all, when someone is looking for a cruise ship, they’re not going to trust a company they’ve never heard of, they want the Disney cruise experience or the Carnival cruise experience—not the “some guys we’ve never heard of with a huge boat” experience. So spend the money now and trademark your business’s name (and it’s logo too if the logo is really nifty and a part of your brand’s image).

  5. Employment Documents: Planning to hire someone (or a few someones)? You’re going to need employment contracts, an employee handbook, and independent contractor agreements at least. And you’d better make sure you know the difference between an employee and an independent contractor, because if you misclassify someone as a contractor who’s actually an employee, you’re going to be in a world of hurt. And at the very least, make sure you know whether your employees are classified as exempt or non-exempt.

  6. Distributor / Vendor / Service Contracts: From E-Commerce sites to plumbers, everyone needs basic contracts to help them run their business. Whether you’re distributing someone else’s goods or selling your own goods or services, it’s always a good idea to have your agreements properly documented—and that means in writing. Oral agreements, while technically enforceable in court, are always an uphill battle, so put your contracts in writing.

  7. Non-Disclosure Agreements (NDAs): Sharing your business information with others can be a good idea, but having them steal that information for their own uses later can be disastrous. That’s where NDAs come into play, when you’re showing off some aspect of your business to a third party (including your employees and independent contractors), you want to make sure they’re not going to divulge the information they’ve gleaned to another, or worse, use that information to further their own business interests. Just make sure you don’t give one of these to a potential investor (from a legitimate investment firm or VC) or you’ll look like a real novice in the startup and small business world.

After all of that, you’re probably thinking there can’t possibly be any more documents that may come into play during the life of your business—but there are. Copyright licenses, trademark licenses, commercial leases, industrial leases, equipment leases, retail leases, franchise agreements, term sheets, share purchase agreements, merger and acquisition documents, and the list goes on. As you can see, this was by no means meant to be an exhaustive list of what kinds of documents you need for your business, but it should give you a better understanding as to why hiring a business attorney sooner rather than later can save you a lot of headaches down the road. These documents aren’t going to write themselves, and only an attorney (or a very, very, very skilled businessperson) should undertake drafting, revising, and negotiating them.

3 Reasons You Shouldn’t Copy and Paste Your Contracts

Three Reasons Why You Shouldn’t Copy and Paste Your Contracts (And Terms Of Service!)

A contract is a legally binding agreement between you (or your business) and another party. While it may seem like a written contract template you found online is perfect for your business, chances are it’s not. While most of the information in the contract may apply to your business, if even a small factor is off it can spell disaster for your business relationship. Here are three reasons why you shouldn’t copy and paste a contract from the internet.

The Contract Doesn’t Apply to Your Business

So you’ve found a contract online that you think applies to exactly what you need for your business. Just change the names and call it good, right? Wrong. Even if you do find a template online that you think matches, chances are there are more significant underlying issues you’ll need to address if you’re hoping for a solid written contract. If the title matches, that’s great, you’re off to a wonderful start, but does the governing law provision match where you do business? Does the term of the contract work with the type of business you’re conducting? Did you mean for that binding arbitration provision to be in there when you find yourself litigating against a customer who won’t pay you? Finally, contracts are often construed against the drafter in court—and if you’ve merely lifted a contract from another, you run the risk of being caught not knowing what a contract you supposedly drafted outlines. These are just a few of the ways a contract you find on the internet may not be applicable to your business.

The Contract Template May Not Be Properly Drafted

If you read the first point, you know that a contract you find online probably doesn’t apply to your business how you want, but did you know not all contracts you find online are properly drafted? Often, especially if the template you found wasn’t actually drafted by an attorney, the provisions of the contract could be improperly drafted and quickly severed by a court in the event of a dispute. Worse, the contract may not include what’s known as a severability provision, or a section of the contract that ensures if a court finds one section of a contract invalid, the whole contract is not invalidated along with it. Without a provision like that, you could find yourself in deep trouble should one provision be stricken—taking the rest of the contract along with it.

You’re Probably Plagiarizing Someone Else’s Hard Work

This is a point that applies particularly to terms and conditions of use or privacy policies on a website. Because so few people actually bother to read the terms of service, most website owners think they can get away with a simple copy/paste job from a similar site’s terms of service. This may have worked years ago, but people are starting to wise up. Essentially, copying and pasting the terms of use seems like a fine idea because, really, how different is one site from another. Unfortunately for many website owners, the differences are just enough that they can find themselves in hot water for copyright infringement. All websites are copyright of their respective owners, and any savvy site owner knows at least a few of the visitors to her site are there for the sole purpose of scraping that site’s content. Numerous tools are available for webmasters to help them track down people who rip content from their sites, and if they catch you stealing their (or their attorney’s) hard work it could spell legal trouble in the long run.

Photo courtesy: Thomas Leuthard

Apple’s Guidelines: The Legal Side of iOS Development Part I

You may think designing, implementing, and marketing an iOS app is a fairly simple process, legally speaking. However, like any other business foray in modern society, there are a number of legal pitfalls to watch out for whether you’re working on the next great iPad game or a fancy new competitor to Foursquare for the iPhone. In this series of posts on understanding the legal requirements for iOS developers, we’re going to be taking a look at everything—from start to finish—you need to familiarize yourself with before and during development of your new iOS app. Topics will range from forming your business, to naming your app, to copyrights and trademarks, to understanding Apple’s terms and conditions, to drafting customized terms for your app. Yeah, this series could get long.

We begin at the planning stage. You’ve decided you want to build an iOS app. Laid out all of the basic features you want it to have. Maybe you’ve even tinkered with a few designs for the GUI. Now you just have to join the Apple Developer Program.

So you sign into Apple’s website, follow the links to the Developer Program. Create a username and password, and you’re presented with a couple of documents you probably just click through without reading like everyone else. These documents, in the order you’ll probably come across them, are the Registered Apple Developer Agreement and the (more importantly) iOS Developer Program License Agreement. These two documents, along with a few others, dictate the terms of the relationship you have with Apple. And you really need to read them before you even think about developing your first app. (Although, it should be said that you generally have to join the developer program before you get to read the iOS Developer Agreement.)

While going through each and every term of the two agreements would be far beyond the scope of this post, we’ll quickly point out . After all, the more you follow along with Apple’s terms, the less resistance you’ll encounter when you submit your app. Some of the key points to be aware of include terms of third party licenses you may also be required to be bound by, such as Facebook and Twitter integration. Others include notices you have to provide to your users if your app needs to take information from other applications, most notably from a user’s Contacts app.

Once you’ve read (and reread) the requirements set forth in Apple’s documentation, you’re all set to start laying the foundations for your business and developing your app—or are you. Stay tuned for Part II of this series, on how to choose the best name for your iOS app.

Photo courtesy: Thomas Leuthard