Business Planning

Why Operation Agreements Are a Must For Business Owners

As with so many things in life, some of the same qualities that help small businesses succeed can also lead to their demise. Fortunately, much of that risk can be lessened through operational excellence.

For example, the owners and managers of small businesses often know each other before they go into business together. Sometimes, they’re even related. Preexisting relationships can help propel small businesses forward, especially when there are high levels of trust and competence.

Unfortunately, however, familiarity is sometimes accompanied by a lax attitude toward operational formalities. Owners and managers may skimp in critical areas such as:

  • Governing documents such as articles of incorporation, partnership agreements, and bylaws;
  • Solid or regular auditing and accounting practices; and
  • Shareholder meetings and minutes.

In worst-case scenarios, business and personal funds are commingled or used for improper purposes.

The good news is that if you are just starting out, it is easy to avoid all of these issues and the accompanying potential for lawsuits and tax problems. As your Family Business Lawyer®, we can provide trusted advice and help position a small business in the most favorable circumstances for that unique business.

Here are some examples of the services a trusted legal advisor can provide:

  • Assistance in identifying recordkeeping products and in establishing high quality recordkeeping practices;
  • Helping owners understand the potential consequences of a lack of proper documentation;
  • Ensuring that clients know the deadlines for business and tax filings; and
  • Explaining the importance of keeping personal and business finances separate.

Perhaps most importantly, a skilled business lawyer can help you structure your operational strategies properly. This can be invaluable in helping your business avoid pitfalls and liabilities along the path toward success. We like to begin with getting to know your whole business, not just the legal side; but, also truly understanding your revenue model, how it serves your life, your team, and your clients. Then, we can advise you on the best strategies for a business that meets not just your business objectives but serves your life as well. 

Schedule your LIFT Strategy Session with us today to get started!

We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.

Read More
Do I need an operating agreement?
Business Planning

Rethink Your Relationship With Legal Agreements: How Agreements Help You Make Better Hires and Find Better Partners

This is the second in an ongoing series covering the value legal agreements bring to your business beyond the surface. From boosting your bottom line and expanding your business to hiring the most talented team and improving every relationship you enter into; this series offers a comprehensive look at how effective legal agreements can enhance just about every aspect of your operation.

When it comes to onboarding a new team member, whether they are an employee or an independent contractor, it’s fairly common to have the relationship not turn out quite the way you had hoped it would. This occurs because the individual either doesn’t provide the services you thought they promised they would provide, or they fail to live up to your expectations in some other way.

A Failure of Process

The cost of team-member turnover could be one of the highest expenses in your business, not just financially, but in terms of time and energy, too. In many cases, changing up your agreement process can ensure you are hiring the right people, who will be with you for a long time and grow alongside you and your business.

Most business owners have a standard employment agreement signed by all team members or no signed agreement at all. In either case, you are setting yourself up for loss right from the start. Every single person you hire, whether as an independent contractor or as an employee, must sign an agreement, not because it’s required by law, but because it’s going to save you from big losses down the road. 

Your agreement needs to be as specific as possible about your expectations for the relationship, establishing metrics for success and time frames for specific goals and objectives to be achieved. When you share these expectations, metrics of success, and time frames with your new hire, you are setting them up to succeed from the very start. And you are giving them an opportunity to clarify whether the expectations are clear and can be met.

Rather than using a generic legal agreement you find online, you should always work with an experienced business lawyer like us, who can create comprehensive agreements for both employees and contractors that are specific to your business. In this way, you can have a solid agreement template, including fill-in-the-blank provisions for your specific expectations, metrics, and time frames for each hire, all ready to go whenever you onboard a new hire.

Clarifying Your Expectations

What’s more, a trusted lawyer can customize your agreements to make them more personal, catering to your specific needs, style, and way of doing business. Having well considered and customizable agreements helps you make better hires because it forces you to be proactive and think through your expectations for the relationship ahead of time. It forces you to consider what kind of things will make the relationship a thrilling success, along with what could cause the relationship to fail.

The more important the new hire is, the more time you should take to negotiate the terms of the relationship. As the business owner, you can provide the template, or base agreement, and then give the new team member the time and space to review it with you and ask questions. Taking the time to careful review and consider the agreement together is extremely important and should not be overlooked.

Built To Last

If you are bringing on a business partner or a high-level team member, I can promise you this: There will be times in the future when you do NOT want to be in business with that person. I can’t tell you exactly what will happen or when it will happen, but inevitably something will come up that makes you feel this way.

And if you don’t have a sound agreement in place that provides you with a reason to not just run away, you might do just that. But running away from a relationship like that is not good for you, and it’s not good for your business.

It’s vital to create solid agreements when you love each other and have high hopes for the relationship. By doing so, you can tailor those agreements to address future outcomes that may be off the charts bad or even just less than ideal, and that’s what’s going to keep you invested in the relationship when it reaches its breaking point. Conversely, there may be occasions when the right call is to run, and a good agreement will provide you with a way to get out as well.

It’s About The Process, Not The Paper

When used wisely, agreements can provide you with a solid foundation for the relationship when hiring your new team members or bringing on your new business partners. Keep in mind, your agreements aren’t about the paper; they are about the process.

We specialize in creating comprehensive employment agreements and partnership agreements for small businesses just like yours. Whether you need new agreements created or want to review ones you already have—even those drafted by another lawyer—contact us today.

We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.

Read More