The 10 Key Legal Documents for Your Business
Documents play an essential role in protecting the interests of the business and business owners over the course of a company's lifetime. Here is a list of the 10 most common legal documents to help you determine what your business needs.
1. Company bylaws for corporations. Most states require corporations to keep a written record of bylaws, although you don't need to file the document with a state office. Bylaws define how the company will govern itself. Even if your company is incorporated in the handful of states that don't require bylaws, they are still a good idea as they spell out your business' structure, individual roles, and governance issues. For example, bylaws can help settle a dispute on the length of a director's term or define if you need a simple majority to approve a decision.
2. Meeting minutes. Most states also require corporations to document what happens at major meetings. They keep an official account of what was done or talked about at formal meetings, including any decisions made or actions taken. They can help settle a dispute about what happened or didn't happen in a past meeting.
Your minutes should be detailed enough to serve as your corporation's "institutional memory." They should include: type of meeting; time and place of meeting; detailed attendance; all actions taken (purchases, elections, etc.); as well as any votes including how everyone voted and who abstained.
3. Operating agreement for LLCs. Although not required in most states, an operating agreement is recommended for every LLC, particularly when there are multiple members involved. This document outlines an LLC's financial and functional decisions. If there is more than one member, it becomes all the more important to define how key business decisions will be made, how profits and losses will be distributed, what are the rights and obligations of members and what happens when someone wants out of the business. Once members sign the document, it becomes an official, binding contract.
4. Non-disclosure agreement. Whether you realize it or not, your business has information that should remain private, such as customer list, financial records, or ideas for a new pricing plan. An NDA is your first line of defense to protecting this information. This legal document creates a confidential relationship between your business and any contractors, employees, and other business partners who might get a behind-the-scenes look at your operations.
5. Employment agreement. This contract sets the obligations and expectations of the company and employee in order to minimize future disputes. Not every hire requires an employment agreement, but the document can be a useful if you want to dissuade certain new hires from leaving your company too soon, disclosing confidential information about your business, or going to work at a competitor. The contract should be reviewed by an experienced employment law attorney before given to an employee to sign.
6. Business plan. A business plan may not be a legal document, but it's required should you ever decide to seek financing or sell your business. Your business plan can be one page or a hundred pages, as long as it provides clarity on your business' opportunity and your roadmap to get there.
7. Memorandum of understanding. An MOU falls somewhere between a formal contract and a handshake. It documents any important conversations you have with suppliers, potential partners and others involved in the business. MOUs are great ways to lay out the terms of a project or relationship in writing, but do not rely on the document to be legally binding.
10. Apostille. Businesses involved in international trade with other Hague Convention countries may need a certificate, known as an "apostille,'' that authenticates the origin of a public document (like articles of incorporation) so they can be recognized in another country. Apostilles are only valid in countries that are members of the Hague Convention.
In most cases, you don't need to create any of these documents from scratch. You can find free templates online to serve as a starting point. While these legal documents are important part of staying compliant with your state requirements, they are more than empty formalities. By taking the time to think about the various elements on each document, you are setting the right foundation for your business.
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