Many of our New Year’s Resolutions address our personal health, but owners of small businesses should also resolve to address your corporate health. Small businesses operate with great attention to the product or service the company provides, but little energy is left to review the infrastructure of the company. Issues such as shareholder agreements, key person insurance, disability insurance, annual meetings and other corporate necessities are given short shrift because of the attention we pay to running the business.
This blog post provides a few suggestions to help you overcome a problem unique to small businesses: spending too much time working in your business rather than working on your business.
- Have you conducted your annual shareholders or members meeting? Even if you are only a one or two person company, it is important for you to observe corporate “formalities” and ensure that you can maintain the protections provided by corporations or limited liability companies.
- Is your corporate book up-to-date? Make sure that your stock or membership records accurately reflect your company.
- Did your company make any major decisions this year? Did you lend your company any money? In either instance, make sure that you have the appropriate corporate resolutions and other documents to ratify and approve the corporate actions.
- Have you updated your shareholder agreement or operating agreement? Do you even know where your agreement is? Almost always, we draft these agreements at the onset, but things change. For a long-running business, we may need to review retirement strategies for some of the owners. Shareholder agreements may have a formula or set a price for share valuation, and that provision may need to be updated or modified.
- Have you reviewed your company’s insurance policies? Many shareholder agreements include key person provisions and require the company to fund an insurance policy to fund a “buyout” in the case of the death of one of the shareholders. You may need to review that policy to determine whether it provides sufficient funding. Similarly, you may want to review any disability insurance policies. Make sure that your small business can survive, and that you can survive economically, if you are forced, by illness or injury, to be away from your business for an extended period.
Undoubtedly, in a small business, we spend almost all of our energy trying to improve our product and service in order to survive in a difficult economy. Take time with your small business attorney to review your governing documents, update as necessary, so that you can enjoy the benefits of your hard work.
Tarley Robinson, PLC, Williamsburg, VA – Attorneys and Counsellors at Law
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