When it comes to starting up a business, it can be quite difficult to gain the initial traction. This is compounded by the fact that if you do not have the proper documents to help your business thrive, you open yourself up to key vulnerabilities that other companies can take advantage of in a court of law. Unfortunately, since many companies do not take these steps prior to growing their businesses by working with a Maryland business attorney, they leave themselves open to legal attacks from competitors. In this article, we’ll go over some fundamental legal documents that you should have in place in order to protect your business from third-party competitors.
1. Business Plan
It isn’t just a tool to help you get the initial funding you need in order to start your business. A business plan can also serve as a roadmap for how you plan on allocating your business materials, how you determine success and growth, as well as determine key elements that can help you overcome potential pitfalls and obstacles. On the legal side, your business plan should carefully document who manages your business, what your main products and services are, as well as should document clearly what the risks are towards investing in your company. This is extremely important as the business plan itself can be referred to if issues with the investment do come up and your investor is seeking damages when they knew what the risk of investment was all along.
2. Partnership Agreements
As they say, two heads are better than one and for many businesses, especially extremely successful businesses, two or three individuals may be seen as the founding members of the corporation. If this is the case, then you will want to make sure that you have the right partnership agreements in place to serve as a “check” in case one partner begins to take up too much power in the group. Partnership agreements should address the names of the partners, partnership duration, how each partner contributes to the business in terms of capital expenditures whether through strict monetary funds or real estate expenses, as well as protocol for when partners leave. These documents are extremely important and can serve to keep the business on track and in the balance as you continue to grow.
3. LLC Operating Agreement
You can set up your business to be a limited liability corporation (LLC) that can give you additional protections that normally wouldn’t be seen in other forms of business organization. When you set up an LLC, you are limiting personal liability as well as generating monetary advantages like tax breaks which can lead to further investment in your business. Because of the tax advantages you receive, LLCs are heavily dependent on state laws which is why you should opt to customize the standards by which your business operates. More specifically, an LLC defines what the business management responsibilities are, how it should be taxed, and who the individuals are that own the LLC. This can be extremely helpful to refer back to in case a substantial claim is made against the legality of your business.
4. Employment Agreement
Any individual that does work for your company for wages or a salary and does not make decisions at the executive level is known as an employee. It is important to have a written agreement that details the terms of the agreement in order to avoid confusion and miscommunication as to their roles and responsibilities within the organization. The agreement should also include wages, working hours, non-compete clauses, termination, and notice-period agreements. Failing to have written documentation can seriously open up your business to major liabilities when it comes to employees that might become disgruntled with their working conditions even if said working conditions were disclosed prior to their employment. Having a document in hand that clearly stipulates the terms can protect you from this while not having one can leave you open and vulnerable.
5. Non-Disclosure Agreement
At the end of the day, you are a business and a business is inherently a competitive entity. As a result, you need to protect your competitive advantage and that means coming up with the proper documentation that will protect your proprietary information, data, or intellectual property from getting into the hands of competitors. Things like trade secrets and business practices are often ripe for mimicry that can seriously cripple your company’s competitive advantages. Prior to offering employment to a new employee, make sure they sign a non-disclosure agreement with the appropriate legal terms in case they try to breach the contract.
When it comes to starting up a business, it is important you have all of your legal documentation in order prior to growing your company. While you may not face legal issues on a day to day basis, it is important to keep this documentation in your back pocket for the day when you have to go to court in order to defend your business. If you are interested in how a business attorney can help in the documentation of any of these matters, feel free to contact us today.