The legal landscape of starting and running a business comes with many potential traps. Missteps may bring you unwelcome lawsuits, tax claims, and other disputes.
Before your business experiences its grand opening, several decisions and transactions await you. The type of business structure, how you fund the business, and your relationships with customers and employees implicate a number of agreements and business laws.
Establishing the Business Structure
Establishing your business starts with your choice of structure. The selection brings particular liability and tax consequences. For instance, general partners face personal liability for business debts. If you choose a corporation or limited liability company, you can avoid exposing your home or personal assets to creditors of the business.
The type of structure determines what documents you must have. Corporations and limited liability companies file articles of incorporation and articles of organization respectively with the state’s business registration office. With a corporation, you will have bylaws to address the composition, duties, and meetings of directors and shareholders.
Agreements among partners, corporate shareholders, or limited liability company members allocate shares of profits, expenses, monetary contributions, and voting rights. Your business agreements also need provisions for when the owners may terminate the business relationship, how, and what happens at the end.
Financing the Start-Up
Funding your venture usually involves business loans. Your lenders will look to mortgages, security agreements, and financing statements to secure loans for your purchases of equipment, supplies, and land.
Creditors will often require owners of newly-formed, small, or closely-held corporations or limited liability companies to sign guarantee agreements. As an owner who guarantees the loan or debt, you face liability if the company defaults. In many guarantee agreements, the creditor can pursue you immediately if your company falls behind on payments.
Keeping Clients and Secrets
Business contracts with employees involve more than salaries, wages, and benefits. Business transaction law services involve drafting non-competition agreements to limit the ability of salespeople, managers, and other employees to take clients or secrets. However, non-compete clauses also restrict the ability of people to find jobs. As such, courts carefully scrutinize these agreements against unreasonably broad geographic reaches or lengthy periods.
Your agreements with employees should mandate confidentiality of client information, formulas, and processes for manufacturing, computer systems, and other sensitive data. Provide rules and policies for the personal use of company computers, phones, tablets, equipment, and supplies.
Dealing With the Initial Clients and Customers
Business transaction law services can help you create the agreements that govern your relationship with the customers you attract. Because they have experience making these kinds of contracts, they can help to close any loopholes and protect your best interests. Depending on your line of business, you will use distribution, supply, manufacturing, licensing, rental, service, and warehousing agreements.
A number of statutes and regulations affect these commercial contracts. For instance, the Uniform Commercial Code and other laws supply standards for delivery, performance, and pricing of goods. The drafting of these contracts also takes into account tax laws, standards of practice for providers of professional services, and international law such as the United Nations Convention on Contracts for the Sale of Goods.
Navigating the complex arena of business transactional law requires planning and careful drafting of organizational, contractual, and tax documents. The business you choose will determine the documents you need to reduce the chances of disputes and liabilities.
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