Knowing what documents are required to start and/or run your corporation can be a bit confusing. The list below identifies six of the most common legal documents that a corporation is recommended to have:
- Shareholder Agreement. If there is more than one owner (shareholder) of the corporation, then a Shareholder Agreement is one of the most important documents that a corporation can have. The Shareholder Agreement sets forth the rights and obligations of the shareholders and states when the shareholders can exercise these rights. A well drafted Shareholder Agreement can resolve conflicts among the shareholders, avoid costly litigation, foster trust and ensure that everyone is in agreement as to the goals and purpose of the corporation. A Shareholder Agreement should be drafted as soon as a corporation is formed, if not prior to formation, as this is the time when the shareholders are likely to be on the best terms and willing to negotiate regarding the terms to be included within the Shareholder Agreement. Some of the common topics covered by a Shareholder Agreement include how the profits and losses of the Corporation are to be shared; how the corporation’s officers and directors are to be elected and the limits on their authority (if any); and if/how the Shareholders are able to transfer their shares to other shareholders or to third parties.
- Most states require that a corporation establish bylaws during the incorporation process; some even require that a copy of the bylaws be filed with the state. It is highly recommended that you draft bylaws even if your state does not require them. Bylaws explain how the corporation will be structured, how it will govern itself and its voting procedures. A well drafted set of bylaws will give clear guidance on how to resolve disputes related to the management of the corporation.
- Meeting Minutes (Annual & Regular). Most states require corporations to maintain a record of what happens at the annual meeting and/or any regular or special meetings. This record is often called the meeting minutes and these minutes can be used later to settle disputes about what happened or didn’t happen at a meeting. It is important that the minutes are detailed as they serve as the corporation’s memory and can be relied upon in a court of law. It should reflect an official account of everything that was discussed or which occurred at such meeting, including but not limit to the type of meeting, the time and place of the meeting, a detailed list of those who attended, a list of all actions taken and a summary of any votes taken (including who voted and how they voted.)
- Confidentiality & Non-Disclosure Agreement. Corporations tend to quickly develop information (like client lists, trade secrets and financial records) that needs to be protected from disclosure to outside parties. A confidentiality or non-disclosure agreement creates a confidential relationship between the corporation and the individual who signs it which restricts the individual from disclosing any of the information to a third party without the corporation’s consent. A well drafted agreement should describe what constitutes confidential information, how it should be handled, and the penalties if information is improperly disclosed to a third party.
- Independent Contractor/ Employment Agreements. Every business needs someone to do the work. Regardless of whether that person is an independent contractor or an employee, it is important that they sign a document outlining the terms of their relationship with the company and their obligations and responsibilities. At a minimum, the agreement should detail the work to be performed by the individual and the compensation to be paid for such work (including when and how it will be paid). By simply placing these basic terms in writing and having the employee/independent contractor sign the document can protect the corporation in the event a dispute occurs between the corporation and an employee over job performance or whether a termination was proper.
- Customers/Vendor Agreement. A corporation should clearly understand the relationship it has with its vendors and its customers. A detailed agreement should be prepared which outlines both parties’ responsibilities and obligations. Often disputes arise due to miscommunications which could have been avoided if an agreement had been signed at the beginning of the relationship.
It is important to consult with an attorney prior to drafting any of the documents above as some states, such as Illinois, require certain items to be addressed within certain documents.
Should you have any questions about any of the documents listed above or to have them drafted for your corporation business law or any other laws that may affect your business, or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.
Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Business Immigration, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law.
This article constitutes attorney advertising. The material is for informational purposes only and does not constitute legal advice.
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