What to think about when you start your company –
Are you going into business for yourself? or are you considering partnering with someone? Many of our clients choose to set up their business as a limited liability company. If that’s you . . .
Start with an Operating agreement - NC Limited Liability Act
Everyone's happy and excited to start a business, especially when you're starting a business with a friend or a partner. But you want to protect yourself just in case something bad happens later. Even though North Carolina law doesn’t require you to have one, you’ll be happy that you made the decision to set up an operating agreement. It protects the business owners (and the business) in the event something goes wrong. It creates the rules for your business to follow.
This also protects you if you don’t want to be in business with the partner in the future. Don’t get stuck in a partnership you can’t get out of. It’s easier for business partners to agree on how disagreements should be handled when everyone’s excited to start a new venture.
An operating agreement will outline the structure of how financial and functional decisions are made. It determines the rules for which each owner will follow and how things are voted on and approved by the owners of the business. FOR EXAMPLE:
· Whether the LLC will have a manger or be managed by the members
· Voting rights of the members
· What decisions will require unanimous agreement of the members
· What members will be contributing to the company (money, services, etc.)
· How profits & losses will be split between the owners
· How new owners can be brought into the business (if at all)
· Whether owners can sell or transfer their interest in the business
· How disputes between members will be resolved
· Buy-sell provisions (what happens if one owner wants out, dies, etc.)
Business breakups are expensive. If you are not protecting the business in the beginning (PROACTIVE) by creating an operating agreement you risk having to pay all the fees for court if there’s a dispute between you and your partners. You don’t want to lose all the assets your business has created.
So yes, while it is important to pick the name of your business and register it – don’t forget this major blind spot... THE SETUP – The operating agreement.
If you are interested in getting an operating agreement in place Kate would love to help you. Remember to be PROactive and not REactive when it comes to setting up your business. Contact us today 704-940-5581.
If you aren’t quite ready for this step – please make sure you know the legal requirements need to start your business.
Here are some other resources for starting and ending your business: Signing a Lease? Here’s What you Should Look for. (kliebertlaw.com) Planning to Sell Your Business? (kliebertlaw.com) How to Close Down Your Business (kliebertlaw.com)
