List of Important Small Business Documents
When you feel you’re ready to go from your 9-5 job and step into full-time entrepreneurship, there are many factors to consider.
With a legitimate business comes a series of legal documentation you’ll need to keep accessible. Unfortunately, you can’t just set up a stall and invite people into your business like a lemonade stand. You’ll have to follow certain processes, applications, and document submissions to legalize and legitimize your business with the proper authorities.
But don’t worry. With the following list of essential documents, you’ll be prepared to handle your steps forward into entrepreneurship in 2022 and beyond.
- A Documentation of Bylaws / Company Bylaws. This document details how you run your company. It contains your company regulations and rules that you put in place. It’s a guideline or framework for how you and your board of directors run the company. It serves as the legal framework of your company. Although not many states legally require a Bylaw, having your bylaws in place will help you maintain order in your business. And it will come in handy as a point of reference if you ever need to settle internal disputes.
- Articles of Incorporation. This is one of the most crucial documents you’ll need when starting your new business. It’s the first document you’ll file and will outline the creation of your corporation. It consists of the name of the company, its location, and its population. File your Articles of Incorporation with a government body. This document is important as you’re declaring what your business is as a legal entity in your state.
- Operating Agreement (LLC). If your company is a Limited Liability Company, you’ll need to have this document handy. An LLC Operating Agreement is an outline of your ownership and member duties. The details might vary, but most will contain the following six key sections:
- Organization: This is the first section of the agreement, and it outlines the basic information about the company, beginning with the owner, members, and the structure of ownership. It also documents the creation of the business.
- Management and Voting: The second section shows how you plan to manage the company and how the members vote on the rights and regulations of the company. The agreement specifies what authority the company managers have through a vote between the members. Voting is the primary process to reach an agreement regarding company regulations. This section details how many votes are required and each member’s voting rights.
- Capital Contributions: This section details the financial contributions made by the members to create the LLC agreement. Each contribution may be compensated with a unit of ownership within the company.
- Distributions: This section shows how membership shares the company’s profits and losses. This could be money, property, or other assets.
- Membership Changes: This section describes how to add or change members and transfer their ownership. There are also regulations for member changes due to member death, member bankruptcy, or divorce between two members.
- Dissolution: This section explains the circumstances under which the company can be dissolved or disbanded. It is also known as ‘winding up’ the company’s affairs.
- Non-Disclosure Agreement. This is a very common document that you’ll encounter in any company. Perhaps you may have signed one for your 9-to-5 office work before deciding to start a new business. The Non-Disclosure Agreement is an agreement between you and any potential business partner not to share information regarding your company and its members. When you’re building a business, you’ll undoubtedly come across business partners, employees, and freelance contractors and may need to share information that’s crucial and confidential to your company. So, it’s important to establish an NDA beforehand to protect the privacy of your information.
- Employment Agreement. Whenever you hire a new team member, you’ll need to present them with an employment agreement that outlines the terms and conditions of their employment and compensation in your company. The Employment agreement covers the obligations of the employer and the responsibilities of the employee. It’s essential to establish an employment agreement with any new team member you hire to make sure you document the company’s regulations for the new hires.
You’ll discover that there are other documents you’ll want and need regularly in your new business. But the five listed above are the most important as you get started. You’re venturing into entrepreneurship to be in control of your time and money, and it’s important to prepare the necessary documents.
Copyright © 2023 SCORE Association, SCORE.org
Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.