This time of year is the perfect time for businesses of all sizes to review several often overlooked areas of the business during the fiscal year-end period that, if done, can set the business up for a good year. new. There are 3 areas to focus on:
1. Review all corporate documents: Most business owners, especially small businesses, typically create their initial corporate documents at the time of their business creation, file them away, and never review the documents again until something happens. At this point, it is often too late to make the necessary changes. Instead, business owners should review their corporate documents annually to determine whether recent growth or downsizing or other business events have changed the company in such a way that updates to the company’s governing documents, such as operating agreements for LLCs o The statutes for incorporated entities need to be revised.
In addition to reviewing all operating documents, it is important to review all meeting minutes of company members or directors to ensure that the proper meetings were held as required by the company’s corporate documents. For example, most corporate documents require meetings of members or directors at least once a year at an annual meeting. Too often, partnerships and limited liability companies run their businesses for years without a single corporate charter reflecting the vote on major business moves or at least the annual annual meeting to elect officers etc.
2. Review important contracts: Every business has at least one type of contract that is vital to the business. Most have several. These contracts can be labor agreements, non-compete agreements, customer agreements, subcontractor agreements, or simply invoices for goods or services performed. No matter what type of contract a particular company relies on, at least once a year these important contracts should be reviewed by a knowledgeable attorney. Laws change often. For example, in Georgia, about a year ago, the legislature passed a statute that now provides guidance for drafting an enforceable noncompete agreement.
If a standard contract used by a company has not been reviewed at all by an attorney or not in years, now is the time to do so. Some examples of what may be missing are
1) clear payment terms;
2) attorney fees provision if a lawyer collects a breach of agreement that will actually make you pay all of the attorney fees instead of a smaller fixed amount;
3) correct interest penalties for late payments that comply with state law;
4) Favorable selection of the place and choice of law provision, so that the laws have to be under the law of your state and close to your business.
3. Review all insurance policies or obtain insurance coverage: Sure. Sure. Sure. It is vital that every business has at least one CGL (Commercial General Liability) policy. Having a business means that you will face at least one lawsuit during the life of your business, if not many, many more. Having the right insurance and plenty of coverage is vital. For example, if you have a fleet of vehicles as part of your business, make sure you have fleet insurance that covers all company vehicles, including UM coverage to protect your employees if they are injured in a company vehicle. Make sure you have workers’ compensation insurance.
Finally, if you have agreements that require your company to be named as an additional insured on someone else’s insurance policy, check that this has been done correctly. This often comes up in commercial leases. The tenant must add the owner as an additional insured on the renters policy. Cases often occur where the landlord never double-checked to make sure the renter added them to the policy until a lawsuit is filed against the renter and landlord.
Year-end planning is the perfect time to look at these three areas of your business and contact an attorney for advice to set your business up for success in the new year.