This time of year is the perfect time for businesses of all sizes to review several areas of the business that often get overlooked during the end of the fiscal year period that if done can set the business up for a good new year. 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 creation of their businesses, file them away and never look over the documents again until something has happened. At this point it is often too late to make the necessary changes. Instead, business owners should review their corporate documents on a yearly basis 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 or By-Laws for incorporated entities need to be revised.
In addition to reviewing all operating documents, a review of all minutes of meetings of the members or directors of the company is important to make sure the proper meetings have been conducted as required by the company’s corporate documents. For example, most corporate documents call for meetings of members or directors at least once a year at an annual meeting. Too often limited liability companies and partnerships run their businesses for years without a single corporate minute to reflect the voting on important business moves or at least the yearly annual meeting to elect officers and so forth.
2. Review Important Contracts: Every business has at least one type of contract that is vital to the business. Most have several. These contracts could be employment agreements, noncompete agreements, customer agreements, subcontractor agreements or simply invoices for goods or services performed. No matter what type of contract a particular business relies on, at least once a year these important contracts should be reviewed by a knowledgeable lawyer. Laws often change. For example, in Georgia, a year or so ago, the legislature passed a statute that now gives a guideline to drafting an enforceable noncompete agreement.
If a standard contract used by a business has not been reviewed at all by a lawyer or not in years, now is the time to have that done. Some examples of what may be missing are
1) clear payment terms;
2) attorney’s fees provision if a breach of the agreement is collected by an attorney that will actually get you all actually attorney’s fees spent instead of a smaller set amount;
3) correct interest penalties for late payment that satisfies state law;
4) favorably venue selection and choice of law provision so lawsuits have to be brought under your state law and close to your business.
3. Review All Insurance Policies or Get Insurance Coverage: Insurance. Insurance. Insurance. It is vital that every business has at least a CGL policy (commercial general liability policy). Having a business means you will at least face 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 as part of the business is having a fleet of vehicles, make sure you have fleet insurance covering all of the company’s 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 call for your company being named as an additional insured on someone else’s insurance policy, double check that this has been done correctly. This often comes up in commercial lease agreements. The tenant is required to add the landlord as an additional insured on the tenants policy. Often instances occur where the landlord never double checked to make sure the tenant added them to the policy until a lawsuit is filed against the tenant and landlord.
End of year planning is the perfect time to look at these three areas of your business and contact a lawyer for counseling to set your business up for success in the new year.