Legal Check Up
If you are like most entrepreneurs, your day consists of tending to a plethora of urgent matters in running your business. You are focused on growth, marketing, and product development and you tend to your employees and services your business has to offer. Throughout this process, you may not have taken the time to stop and assess whether you have put in place a proper legal foundation for your business to ensure the long-term health and sustainability of your operations.
Maybe its time for you to take a moment and assess your legal check up.
The followings are some of the issues you should consider in your review of your legal check up:
1.Business Structure – do you have the optimal business structure for your current size business? When you set up your business, you may have opted for a sole proprietorship because it was easy and efficient to establish. Now that your business has grown and you have established a healthy client base, it may be time to re-evaluate whether this is the most suitable business structure for your needs. During your legal check up, we assess whether you have the correct form of business structure to optimize your overall tax-planning and whether your current structure can withstand a corporate merger or acquisition.
2.Internal Structure and Government Documents – Do the officers, directors and shareholders of your business have clear agreements that outline their roles and responsibilities as well as their compensation? Here, we review whether the corporation’s by-laws are effective for the type of business you run, whether you have or require a shareholders agreement, and whether proper directors and officers have been elected and appointed under the applicable statute. As well, we look at directors’ incentive plans or compensation plans to keep your big wheels incentivized to continue to grow your business.
3.Ownership Interests – During your legal check-up we will review your corporation’s shareholders’ ledger, register and share transfer register as well as the physical share certificates to ensure that the shares have been properly issued to the relevant shareholders (owners). If there are multiple shareholders, we will check to ensure a valid shareholders agreement is in place.
4.Buy-Sell & Exit Provisions – We will review the constating documents of your corporation to review whether you have appropriate buy-sell and exit provisions in case a shareholder wants to exit, or intends to sell his or her shares of the business. Additionally, we will ensure proper valuation provisions are in place so that there are no disputes as to the value of the shares upon exit.
5.Identification of Intangible Assets – During the busy shuffle of growth of your business, you may not have stopped to take stock of your intangible assets. These include your logos, slogans, non-competition agreements, contracts, leases, and licenses. A legal check-up will identify the array of intangible assets and prepare one distinct location to house these types of assets. This will also ease the valuation of the business in the event you wish to sell, a purchaser circles you for a buy-out or one shareholder wants to exit the business and sell his shares.
6.Life Insurance – Does the corporation have a policy to fund the buy-sell provisions in the shareholders agreement? Do the owners have life insurance to fund the capital gain that will arise on the value of their shares in the corporation at their death? During your legal check -up we will review your exposure and ensure that appropriate plans are in place.
7.Employment matters – Do all of your employees have employment agreements with clear Non-Competition, Non-Solicitation and Non-Disclosure provisions? A legal check-up will reveal whether these provisions are properly in place. In the absence of these covenants, employees and vendors will be free to solicit your customers and hire away your employees. Does your business have an employment policy handbook? The handbook is an essential document in setting expectations with both the employer and the employee and allows the company to impose employees policies on a consistent basis, which provides an effective defense against claims of discrimination.
9.Trade-marks and branding – Have you developed and used logos or slogans in your business, but you never got around to trade-mark registration? When your company is small, registration may not be so important. But as you grow, your competitors may want to knock off your goods or services. As well, you may want to create clear and consistent branding as part of your marketing strategy. Here, we will review your company’s brands and logos and determine whether trade-mark registration is recommended. If you are currently registered, we will review the status of the registration.
Shira Kalfa, BA, JD, Partner and Founder
© Kalfa Law 2020