Customized Business Documents - A Must for Any Successful Business
Post by: Lesley Hempfling
You filed your Certificate of Formation or Articles of Incorporation with the Secretary of State. So now you are ready to do business, right? Not so fast...
First, will you be doing business under the exact name that you filed with the Secretary of State in your Certificate of Formation or Articles of Incorporation? If not, you need to file a D/B/A ("doing business as") with the Secretary of State and with the county in which you are regularly conducting business. Before you can file the D/B/A, you must do a search of the county database to determine whether the name you want to use is already in use by someone else. This may save you from being a party to a lawsuit down the road.
Are you a co-owner in the business? If so, there are many questions that need to be answered at the outset. How will you share ownership? What about voting rights? What about capital contributions? How will you make important decisions regarding the business when you disagree? What type of tax elections can be made and will you make? These are just a few of the issues that can be addressed in the Company Agreement of a Limited Liability Company, the Bylaws of a Corporation or the Partnership Agreement of a Limited or General Partnership.
What happens if one of the owners dies becomes disabled or gets divorced (since Texas is a community property state, the non-owner spouse may have an interest in the business)? Do the remaining owners have the first option to buy the departing owner's interest? What if an owner wants to exit voluntarily from the business? Do the other owners have the right of first refusal to buy the exiting owner's interest? How will the business and/or the remaining owners pay for the departing owner's interest in any of these scenarios? Will the business take out life insurance on each of the owners to cover the cost of a buy out in the event of death? Will each owner take out life insurance on the other owners to fund the buy out? These are just a few concerns that can be dealt with in a customized buy-sell agreement.
So, before you start "doing business," make sure you have all of your company documents in place. In the end it will save you time, money and maybe even some friendships.