It’s the most wonderful time of the year, or so they say. During the holiday season, it’s incredibly easy to neglect your business and, basically, coast to the end of the year. While you shouldn’t feel guilty for getting into the holiday spirit and spending time with loved ones, consider taking some time to get your company a present, too.
One of the best gifts you can give your company is a tune-up of its internal documents and contracts. The provisions we cover below could be outdated or, simply, provisions that you didn’t pay much attention to when you started your company. Either way, it’s worth a second look.
Notices.
In LLC operating agreements, partnership agreements, and almost every other internal governing document, the “notices” provision prescribes the method for communicating with the other owners, partners, or members about important matters. For example, a special owners’ meeting could only be called through written notice. The purpose of the notices provision is to ensure that nothing important slips through the cracks, and your company would benefit from a well-thought-out notices clause.
Legal jurisdiction.
Any disputes among owners might eventually have to be settled in court. If a partnership dispute or some other internal strife gets to that stage, you need to be prepared to have your lawyer of choice ride into battle with you. That might be impossible if the laws governing the business are not in your home state. Depending on the ownership situation, you might present a menu of options for this provision. This provision is also incredibly important in your company’s external contracts.
Dissolution.
All good things must come to an end. When the time comes to close the door on your business, it’s worth your while to map out the process. Do you want a majority vote of owners to decide on dissolving the company? Many businesses can be dissolved by a simple majority vote, but that might not be what’s best for your company. The dissolution provision should also prescribe the process for liquidating the company’s assets and establishing creditor priority.
The reason for which is to avoid disputes from your creditors and from within your company. In some instances, as you dissolve your company, you will be obligated to pay the creditors first— regardless of what your operating agreement states. In other scenarios, creditors must be notified so that they can make claims upon what they are owed before the company is legally and entirely dissolved.
The cost of overlooking this could be severe. Receiving assets that should have gone to creditors could potentially make you liable. In other words, you may be held responsible for the amount that was improperly disrtributed.
Buyout.
Your business might not end just because an owner or partner leaves the company. When this happens, the company or other owners might have “right of first refusal,” meaning that internal stakeholders have the first chance at buying the departing owner’s shares. The buyout, or buy-sell agreement, can stipulate the valuation method for the ownership interests. Other owners might get a discount on the ownership interest, for instance.
These provisions are four of the most important for your company’s internal framework. Even the most carefully formed contracts and documents need to be updated from time to time. Life is full of change, and being proactive about change for your company can place it in a strong position heading into the new year. Trembly Law Firm can help make that happen. Contact our team today through our website or by calling (305) 431-5678.
