Table of Contents:
- Benefits of Business Planning
- Legal Documents
- Business Concerns
- Why You Need It
- Plans Attorneys
- Buy Sell
- What Is It
- Used For
- How Is It Used
- Shareholder Agreements
- What Is It?
- Corporate Shareholder Agreements
- Do You Need One
- LLC Operating Agreement
- Need One?
- Default Rules
Benefits of Having an Attorney Help with Business Planning
So you’re ready to start a business. Now that you have an idea of what you want to do, the question is “how would you do it?”
The planning phase is one of the most important parts of starting a business. A business plan ensures that your whole enterprise won’t go down in flames as soon as you launch it. It provides a roadmap towards your end goal, no matter how small or big your business is.
Perhaps you already know that you’ll need an accountant to help you get started. But did you know that having an attorney is just as essential when it comes to business planning?
Hiring a business attorney is not something that immediately occurs to beginning entrepreneurs. Chances are, they won’t even think about hiring a lawyer until they’re being sued. But hiring a business lawyer is something you should prioritize so you could avoid a lot of pitfalls that most other business owners get into.
It’s better to avoid these legal troubles entirely instead of having to deal with them once the damage has been done. Here are some of the benefits of working with an attorney during the business planning phase.
Looking Over Your Legal Documents
When you’re starting a business, you need to process certain legal documents. The kind of legal documents may depend on the kind of business you are starting, be it a sole proprietorship, a partnership, or a small corporation.
For example, if you’re purchasing property for your new business, you may need some help with the sale and the sale documents.
Somewhere down the line, you may need estate planning documents, partnership agreements, or incorporation documents. A small business lawyer can help you set it up neatly.
Your Business Concerns, Clarified
Business planning is tricky enough even without taking into consideration the legal aspect of it all. With a business attorney on board, you can discuss all your concerns and ask them all the necessary questions.
Ask them what kind of taxes you will have to pay and how you could do that. Ask about legal documents, copyrights, patents, etc. If you have a new product or an invention that needs to be patented for protection, you can ask them how to do that as well.
You may want to find out how hiring employees works. Or you may need assistance drafting contracts or employee handbooks. How does business insurance work? Do you need to provide health insurance and bonuses? These are some of the questions you may want to ask your business attorney.
A business lawyer can give you sound advice and tips on how to run a business smoothly. This way, you’ll avoid getting sued over something unexpected, and you won’t have to go to court. There are all kinds of trouble you can avoid by simply planning ahead and having someone’s expert opinion as your guideline.
Work with Gudeman and Associates Attorneys today and we will help you through this essential part of business planning.
Why Your Business Needs It
Did you know that hiring an attorney to help create a formal business plan is one of the best strategies that new business owners can use?
You’re probably familiar with the phrase: “prevention is better than cure”. Of course, we know that this applies to more than just common diseases and illnesses. Beyond its medical connotation, it reminds us to avoid problems entirely instead of looking for a way to fix them.
In the world of business, where brands are competing with one another for complete dominance, there’s no place for rookie mistakes. We can even say that mistakes aren’t welcome even when you’re just starting out and competing with no one in particular. After all, you’ve invested a lot just to get your business running. And if you hit a bunch of roadblocks early on, you could easily lose money.
It is in this case that prevention becomes much better than cure. If you’re not busy putting out fires, then you can focus on growing your business.
This is where the business plan plays a crucial role. A business plan is a written plan that details the key elements required for business development. It can serve as your guide towards a successful future, where your company is thriving instead of merely surviving.
A business plan outlines your goals, your objectives, and all the strategies and information you need to achieve them. On this article, we’ll be talking about why your company needs a business plan from an attorney.
Business Plans and Attorneys: What’s the Connection?
Many new entrepreneurs don’t realize the importance of having some legal advice while creating their business plan. They end up learning this lesson the hard way. After all, it’s not easy to see what traps you might get caught in if you’re new to the business landscape. You will need help navigating this mess.
Business planning with an attorney will allow them to give you advice on which direction you can take: what options you have and how to achieve your goals without breaking any laws along the way. You don’t want to lose thousands of dollars before your business even gets off the ground.
Your lawyer can help you through the process. Some of them can even make a business plan for you.
Whether you’re a brand new startup or you’re preparing your business for the next phase, a competent lawyer will help guide you through the process of creating a long-term strategy that’s sustainable and realistic. Need business tips on how to maximize financial success? Need assistance with a legal issue? Our business lawyers can provide the assistance you need to start your business and establish your brand as a reputable business entity. Gudeman and Associates Attorneys can help provide the legal guidance your business needs.
Buy and Sell Agreement: What is it?
It’s safe to say that you need a business plan if you’re hoping for the slightest chance of success in this endeavor. But that part at least, is common knowledge.
What some entrepreneurs don’t realize when they are only starting out is that it’s also good to think about the future of the company. And here, we’re not just talking about expansion and business growth. We’re talking about the very real possibility of an owner leaving their business.
Here’s where the buy and sell agreement comes in, and that’s what we’re going to talk about today. What is it? How does it work? What is it for? Let’s take a closer look.
What is a Buy and Sell Agreement?
A buy and sell agreement is like a “business prenup”. It is a legally binding agreement that is used to reallocate a share of a business in the event that an owner dies or leaves the business. This document governs over the situation should anything happen to one of the business owners. In a nutshell, we can say that it allows someone else to buy the shares of the departing partner, proprietor, or shareholder.
Buy and sell agreements are also known as “buy-sell agreement,” “buyout agreement,” or even a “business will”. It is used by sole proprietorships, partnerships, and closed corporations in order to divide the business share or interest when an event triggers this demand.
In this way, buy and sell agreements are similar to a premarital agreement, except it’s between business partners—and there’s typically no marriage involved. But a “divorce” of sorts could happen when one of the partners leave the company. Certain events can trigger this buyout, the most common of which are death, disability, retirement, or an owner leaving for any reason.
Buy and sell agreements consist of legally binding clauses which helps control certain business decisions.
It dictates who can buy the departing partner’s or shareholder’s share of the business. It will be agreed upon whether outsiders will be able to buy these shares or it will be limited to other partners and shareholders. It will also dictate what price will be paid for these shares.
Buy and sell agreements can be in the form of a cross-purchase plan. It can also be a repurchase plan.
It is highly advisable that you work with an attorney during the early stages of your business planning, because it will get difficult to create a suitable buy and sell agreement that is fair for all parties involved. You may also hire financial planners to ensure that the buy and sell arrangement is well-funded when the time comes that the buyout event is triggered.
Work closely with your lawyer to create a solid business plan that will allow you to navigate the legal aspect of entrepreneurship. There are a lot of pitfalls that new business owners can fall into without them even realizing it. The moment they get sued, that’s the only time they realize how important it is to have a lawyer.
But prevention is always better than cure. A buy and sell agreement only highlights the importance of preemptively creating solutions for future problems. This is how the best entrepreneurs stay ahead of the game: by taking everything into consideration and not allowing anything to slip through the cracks.
If you want to establish fair value of a share of a business to prevent legal disputes, create a buy and sell agreement now.
How Are They Used?
A buy and sell agreement, also known as a buyout agreement, a business will, or simply buy sell agreement is a formalized business continuation plan. It is designed to guide the orderly disposition or continuation of a certain business.
Newer entrepreneurs may have not thought about this yet: but what happens to the business if you decide to retire? What happens if one of the partners suddenly die? How does the business continue if one of the shareholders become disabled?
A buy and sell agreement is used by sole proprietorships, partnerships, and closed corporations to settle these disputes in case an event triggers a buyout. It allows all parties involved to divide the business share or interest in the event that one of the owners leaves.
This legally binding agreement will reallocate a share of a business in the event of retirement, death, disability, or any other reason for departure. It consists of legally binding clauses that help control certain business decisions going forward.
How is the Buy-Sell Agreement Used?
This agreement will dictate who are allowed to buy the departing partner’s or shareholder’s share of the business, and how much they will have to pay for these shares. It may be limited to partners and shareholders, or it may be opened to outsiders. The purchase price will be agreed upon in order to anticipate business divorces.
Under these terms, the specified buyer is legally obligated to buy the interest, while the interest holder is obligated to sell the interest.
This is done to help preserve the business, while considering all parties involved and making sure the agreement is fair.
Properly structured, a buy-sell agreement has plenty of advantages. It can control the value of the business for estate tax purposes as well as the estate taxes due on the assets.
For the departing partner, it can convert the business interest into cash, in order to provide financial security for the deceased interest holder’s family.
For the remaining owners, it protects them from gaining an unwanted co-owner while also ensuring the continuity of the business.
It also ensures the orderly disposition of the business, in the event that the sole proprietor is no longer capable of continuing it. The two main types of buy sell agreements are stock redemption and cross purchase plans. It is a good idea to get legal advice as to which one is better for your company.
It is advisable that you work with an attorney while drafting a suitable buy sell agreement. This will ensure that the agreement is fair for everyone involved. It will protect you, your partners, your shareholders, and the business itself. In the future, when your business has a lot of loyal customers, this agreement will somehow protect them too—by allowing their favorite brand to survive.
In fact, it is advisable to work with an attorney throughout the entire business planning phase. There are a lot of things they can help you with: and securing your business’s future is just one of them. If you want your business plan to be foolproof, hire a lawyer. Work with Gudeman and Associates Attorneys today!
Corporate Shareholder Agreements
In a corporation, things don’t always run smoothly. Sometimes there are disputes, sometimes there are conflicts of interest, and sometimes there are disagreements between parties. It is only natural that people don’t always see eye to eye.
And because of how common these disputes are, it is important to make sure that it does not sink the corporation. A simple agreement can help keep the entity afloat, even when tensions are rising like the tides.
This is where the corporate shareholder agreement comes in. Today we’re going to discuss what it is, what it’s for, and how it is used.
What is a Corporate Shareholder Agreement?
A shareholders agreement is a legally binding document between some or all of the shareholders of a company. It is used to regulate matters of internal management, including conflict resolution and decision making. This contract defines the scope of the relationship between the contracting parties.
This agreement guides future decisions, in case shareholders have a conflict of interest.
Corporate shareholders’ agreement covers a wide range of matters, with provisions that can be tailored to suit the needs of the individual company.
Shareholder consent matters are usually included in the provisions. Another common provision is the restriction on the transfer of shares to outsiders and third parties. This is usually included by family-owned corporations who want to keep the company family-owned by carefully selecting shareholders.
Corporate shareholder agreements may also dictate the automatic transfer of shares when a certain event triggers a buyout—for example, death or bankruptcy of a shareholder. Although typically, this specific provision is detailed under a buy and sell agreement, some corporate shareholder agreements also cover this.
Unless the provisions dictate otherwise, shareholders are free to transfer their shares to whoever they wish. This agreement may also give shareholders the first right of refusal on any share transfer.
Corporate shareholder agreements ensure that there’s a degree of control over how the business is run. It may even contain a list of matters or events that are not allowed to happen without the prior written consent of an agreed number of shareholders. This keeps all decisions under control, in the interest of protecting the company, as well as all of its shareholders.
How is the Corporate Shareholder Agreement Used?
While this agreement is usually used for guidance, in order to facilitate correct decision-making that’s fair to all parties concerned, using it by enforcing its provisions is also as important.
As a legally binding document, members cannot simply ignore the provisions they agreed upon—not without risk of getting sued by another party.
Additional clauses may be added to the corporate shareholder agreement, depending on the circumstances. If a new shareholder joins the company, they are not automatically bound by this agreement, so keep that in mind. They have to formally agree to adhere to the provisions of this agreement in writing, to ensure that the provisions also apply to them.
Matters that are not covered in the shareholder agreement will be governed by the state’s corporate law.
It is important to have a lawyer look over the corporate shareholder agreement to make sure it is fair for all parties involved. Work with Gudeman and Associates Attorneys today!
Do We Need A Shareholder Agreement?
There is no legal requirement for companies to have a corporate shareholders agreement. But there are a number of compelling reasons why you should consider getting one anyway. Every company is advised to have it because it secures the company’s future, and also keeps it in the right direction.
Shareholder agreements are there to ensure that the company is being run properly and that the responsibilities of the shareholders are defined. It is better to operate with a clear direction in mind. And in a corporation, where multiple people are running it and making decisions, disputes and disagreements are inevitable.
With the help of a corporate shareholder agreement, actions and decisions cannot be executed unless it is in the company’s best interest. To this end, the legally binding document dictates what can or cannot be done, and which decisions require a consensus or discussion.
If there is conflict between shareholders, the agreement will be used as the guide. The end goal is to run the company as smoothly as possible, to make it as profitable as it could be.
Here are some of the benefits of having a corporate shareholder agreement.
Minimizing and Settling Disputes
A shareholders’ agreement is a simple and easy way to minimize or even prevent potential business disputes from happening in the first place. The agreement makes it clear to each shareholder how decisions are made.
If there are disputes, the agreement will also provide procedures for their resolution.
There are situations that could affect one shareholder, which does not necessarily affect the others. Personal circumstances such as death, retirement, divorce, or disability can end a person’s connection to the company. A corporate shareholder agreement can safeguard the remaining shareholder’s financial interest in the company.
The agreement will help decide what happens to the departing member’s shares: who is allowed to buy them, and to whom they are offered first. Usually, this is discussed in a buy and sell agreement, but a corporate shareholder agreement may also cover it.
Changing the Company’s Legal Position
Without a shareholder agreement, a company is subject to control in accordance with the comprehensive body of company law. This would normally govern how a company would be run, settling disputes, etc. But with your own corporate shareholder agreement, the company may follow whatever arrangement was agreed upon between the shareholders. This changes the way the company works and makes it so that the shareholder’s specific needs are prioritized.
With such an agreement in place, a corporation could easily make a case for its own stability. The existence of the shareholders agreement can help in raising finance from banks or creditors. It demonstrates that the company has a solid goal in mind, and is capable of following through. It makes it that much more attractive to potential partners.
Having a corporate shareholder’s agreement is something newer business owners don’t have in mind. It’s not something they prioritize, not realizing how important it is in securing the company’s future.
Work with Gudeman and Associates Attorneys today and create a corporate shareholder agreement that suits your company and protects all shareholders and parties involved.
Starting your own company can be a challenging task, but there are plenty of guides out there to provide the information you need. Better yet, start working with an attorney as you make your own business plan to avoid many of the legal pitfalls that new entrepreneurs can get themselves into.
For business owners, the concept of liability isn’t always clear to them. And yet it’s one of the most important things that have to be considered when choosing what kind of company you’re going to create.
An LLC, or limited liability company, is one of the business types that you may choose. It is a corporate structure wherein the members of the company cannot be held personally liable for the company’s debts or liabilities. It combines elements of a corporation and a sole proprietorship (or partnership), making it a hybrid entity.
The limited liability feature is similar to that of a corporation’s, while the availability of flow-through taxation to the members of an LLC is more similar to that of a partnership’s. Before you can enjoy all of its benefits, you may need to have an LLC operating agreement—and that’s what we’re going to discuss here today.
What is an LLC Operating Agreement?
An LLC operating agreement is a legal document. It outlines certain important aspects of the business that need to be defined, including the ownership and member duties of the Limited Liability Company. The LLC operating agreement dictates the business’ financial and functional decisions. It establishes rules, regulations, and provisions, so that the company can always stay on the right track.
The agreement allows the business owner to set out the financial and working relations among the business owners or members. The same goes for the working relations between members and managers.
This document governs the internal operations of the business, in a way that suits the specific needs of its owners. Once signed, the members have to abide by the terms in the agreement, because this document is a legally binding contract.
In fact, some states in the US require all LLC’s to have an operating agreement. While not required in all states, an operating agreement is still highly recommended because it structures the organization as well as its finances. It provides rules and regulations, which are necessary for a smooth operation. It can manage disputes and claims.
It also provides a proper legal documentation that proves that the owners and members are a separate entity from the LLC, and are thus spared from liabilities.
If the LLC does not have an operating agreement, it will be governed by the state’s default rules. This means your company’s specific needs won’t be covered completely.
If you’re planning to start an LLC, it is important to work with and consult an attorney. This way, you can create one that’s fair to all parties concerned, and is suitable to your needs. Work with Gudeman and Associates Attorneys today!
LLC Operating Agreement: Why Your Company Needs One
If you’re interested in starting an LLC, you may want to consider creating an operating agreement for it. On this article we’re going to talk about what it is, what it’s for, and why your company needs one. But first, let’s have an overview of what an LLC is, to understand why the operating agreement is necessary.
An LLC, or limited liability company, is a business structure that combines some elements of a partnership and a corporation. It is a corporate business structure wherein the members of the company cannot be held personally liable for the company’s debts or liabilities. This hybrid entity features the limited liability feature of a corporation, and the availability of flow-through taxation to its members, just like in a partnership.
An LLC operating agreement is a legally binding document that outlines the important aspects of the business that need to be defined. This includes ownership and member duties of the Limited Liability Company.
This agreement dictates the business’ financial and functional decisions. It establishes rules, regulations, and provisions, so that the company can always stay on the right track. Some states in the US require all LLC’s to have an operating agreement. And even if you are not in a state that requires it, it is still highly recommended to have one. And here are some of the reasons why.
It Allows You to Customize Your Company’s Structure
The LLC operating agreement allows you to choose how you’ll split your profits among all members. You can use it to split the workload, dictate the distribution of shares, etc.
With this document, your members can create a more suitable structure that fits your company’s needs. You’ll have more control over how the business functions. This provides the flexibility you need to choose the roles and rights of each business owner.
It Protects Your Limited Liability
This simple document provides your company much more credibility than you might expect. You will earn more respect from courts if your LLC is protected by an operating agreement. It’s the formality of such document that establishes your business as one with a clear vision.
Without it, your company may even be viewed as a partnership, or a sole proprietorship, preventing its members from reaping the benefits of an LLC. This may create problems down the road, especially when it comes to liabilities.
It Avoids Your States’ Default Rules
An operating agreement isn’t just for formality. It actually helps you avoid the default rules enforced by your state to govern all LLC’s that don’t have this particular government. While these rules may work with a company just fine, it doesn’t guarantee that it will fit your member’s specific needs.
You will eventually want to settle disputes and claims in a way that all members agree with.
This document governs the internal operations of the company. Once signed, the members have to abide by the terms in the agreement, because this document is a legally binding contract. It provides rules and regulations, which are necessary for a smooth operation.
Work with Gudeman and Associates Attorneys today and create an operating agreement that’s right for your limited liability company!
We work with clients throughout:
- South East Michigan, Detroit, Sterling Heights, Troy, Madison Heights, Bloomfield and Oakland County
Gudeman & Associates, P.C.
1026 West Eleven Mile Road Royal Oak, MI 48067-5403