Business Check-Ups – Is It Time for Your Company to “See the Doctor”
By Chuck Roach, Roach Law Firm
Like most people, I put off going to the doctor. If I’m feeling good it seems unnecessary, and if I’m not feeling good they carry the potential for bad news – and expenses. The same holds true for business owners. I have clients for whom I formed businesses 10 years ago, and would wager they have not looked at their corporate or LLC minute book since. But a business check-up does not need to be painful or expensive, and often it can provide enormous benefits that will aid in the growth and sustainability of the company.
For small business owners, a legal check-up is not just a precaution against legal pitfalls. It’s a way to protect business assets, discover and formalize “unrealized” assets, and get the administrative house in order for a future sale or handoff of the business.
For my clients, I encourage a rundown of the OPTIMA checklist:
O – Organization – Is the business still properly organized as a sole proprietorship, LLC or corporation? Is there a better entity now based on growth or accounting and tax considerations? Are required annual minutes and records up to date?
P – Protection – Are ownership interests protected from “surprise” transfers to third parties, such as on the death of a shareholder, through a buy-sell agreement? Is confidential information protected for prospective business deals through non-disclosure agreements?
T – Trademarks and Intellectual Property – Has the business developed a logo or “brand recognition” that now carries significant value on its own, and therefore needs protection through trademark registration? Is there other intellectual property the company has developed that needs protection through copyrights or patents?
I – Investors and Capitalization – Does the business have enough cash or capital for continued growth? If not is there a plan to attract investors with partial ownership in the company, or through attractive loan terms?
M – Management of Vendors, Employees, Customers and Contractors – Does the company have an employee handbook or policy manual to address compliance with applicable HR laws? Are there non-compete agreements needed to reasonably restrict competition from departing key employees? Are service and sales contracts up to date with vendors and customers?
A – Asset and Stock Sales of the Company in the Future – At some point every company changes hands – either succession to the next generation in a family business, or sale to a third party. Is the company in position to maximize the value of its assets and stock to assure a smooth and mutually beneficial transition?
If you own a business – no matter how small – ask yourself these questions. If you decide it’s time for your business to finally “see the doctor”, make the call to your counsel. You will be glad you did.
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