We get a check-up on our cars, our appliances, and our teeth - but not our businesses.
As an attorney, it always surprises me how many people neglect a "tune-up" on their business. No matter how long the business has been in existence and no matter how much money it makes, there are always legal issues that need to be addressed.
The legal issues that affect a business change as the business grows and changes. In the beginning, a business is concerned with forming the correct entity, drafting clean contracts, and setting up the proper accounting. As the business grows, so do the legal concerns; employment law issues, mergers and acquisitions, and securities law may dominate the minds of larger business owners. And, just when a business gets a handle on its legal issues, the law changes!
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My clients come from many different professions and backgrounds. They are restaurateurs, architects, web developers, physicians, and many other specialists and experts. They spend their time perfecting their craft, not learning the law. In fact, it would be counter-productive for them to spend their time on the law. Because of this, forming a relationship with a knowledgeable attorney is imperative. Below are the top three mistakes I see most often when doing my legal "check-ups."
The entity is not properly formed. There are a number of procedural requirements to forming your entity and many people miss at least one of them. Unfortunately, even one omission can render your entity non-existent.
The contracts are missing many important elements. Each state has its own laws that govern contracts. Some of these laws are tangible and easily identified. Others (like the duty of good faith and fair dealing) are not so easy to understand without the help of an attorney.
There is no Operating Agreement. I see this one most frequently. Since the majority of the businesses I work with are limited liability companies (LLCs), I always ask to see the Operating Agreement first. The majority of the time, there isn't an Operating Agreement to speak of. This document may be one of the single most important documents a business creates. It dictates the relationship between the owners of the business and should not be overlooked.
Your attorney should provide periodic legal "tune-ups" on your business, reviewing your entity, updating your policies and procedures, revising your contracts, and handling the many other items that put you and your business at risk. You have worked so hard to build a life and a legacy for you and your family. Isn't it is worth the same "check-up" your car gets?
Megan Porth is the owner and managing attorney at Your Contract Shop. Megan was born and raised around entrepreneurs and business people. From a very young age, she was attending networking events, strategic planning meetings, and marketing seminars. Her passion for helping businesses grow inspired her to go to law school, where she graduated with honors. She currently owns her own business consulting firm in addition to being a practicing business law attorney.
Megan Porth is only licensed in Arizona. Any other work done through Your Contract Shop outside of Arizona will be done only with attorneys who are licensed or authorized to practice in that state.
*The materials provided in this article are for informational purposes only and not for the purpose of providing legal advice. Use of and access to this article does not create an attorney-client relationship between Your Contract Shop and the user. You should contact your attorney to obtain advice with respect to any particular issue or problem.