Legal Documents: Top 10 “Must Haves” for your Business

Legal Documents:  Top 10 “Must Haves” for your Business
Legal Documents — UGH! Ok, I get it….I get it…. — but, you are thinking of starting your own business…..or….you already started your own business…..great! How exciting! So, let’s discuss some important legal documents for your business.  So, what legal documents do you think you should you have?  What legal documents are required?  What legal documents do you already have? Let’s check it out…. Signing Legal Document I have compiled a list of “must have” legal documents that are needed for your business.  Of course, there will be other legal documents necessary for your business, but these are the ones that are most important and vital for your business.
  1. “FILED” Certificate of Incorporation (Certificate of Formation for LLC)

"Filed" Certificate of Incorporation - Legal DocumentThe above image is an example of a stamped “Filed” Certificate of Incorporation, a legal document which forms a new company. This is the official legal document that gets filed with the Secretary of State and makes your business officially a legal entity.  So, if you have filed one, CONGRATS!  You’re in business!! In most states you can incorporate (form) your legal entity online.  The Secretary of State handles the filings of all the legal documents.  Once you have filed the Certificate of Incorporation, the state will mail you a stamped “Filed” Certificate of Incorporation. Keep the original “Filed” copy of your legal document in your corporate book/records.  Then, make a few copies – you will need this legal document to open a new business bank account. So, what’s in the Certificate of Incorporation? The Certificate of Incorporation provides the name of your business, the address, the stock structure, the registered agent (can be you), registered agent address, business purpose and the names and addresses of the board of directors and initial shareholders. Note that the requirements of what must be in a Certificate of Incorporation vary from state to state.  So be sure to check out your state to ensure you have all of the information you need to complete the Certificate of Incorporation so you can form your new business. I also highly recommend you consult with a business attorney prior to forming your company and filing any legal document with the Secretary of State.

Secretary of State Websites and Phone Numbers:

  1. EIN Number

EIN number - Legal Document Once your Certificate of Incorporation has been filed with the Secretary of State, you will need to obtain an EIN (Employer Identification Number) from the IRS.  The EIN is like a social security number, but for businesses.  Although it is not a per se legal document, it is essential to owning and operating your business. Once you have completed the application (online or via mail), you will get a letter from the IRS with your new EIN.  You can download the letter directly from the IRS website.  So, go ahead and download it, print it, and put it in your corporate book, or in a safe place. Also, be sure to make a copy of it.  The bank will like it when you provide them with a copy of your IRS letter containing your new EIN number. In addition to obtaining an EIN after you have filed the Certificate of Incorporation, you will need to check with your state regarding the registration of your business.  Most of the Secretary of State websites will provide you with additional information about your business and whether or not you need to register it.
  1. Bylaws (or if an LLC, an Operating Agreement)

Bylaws - Legal Document The bylaws are the rules of your business.  They do NOT get filed in any courthouse, or secretary of state.  The bylaws are for your internal records.  Most states require bylaws. Having bylaws is a great idea and will help with such things as:  your business structure, officer and director roles, number of board of directors, board of director election, terms, vacancies and specifically how you will conduct company business and affairs. You can probably find “template” bylaws online, however, it is best to consult with your business attorney so your bylaws can be custom fit for your business.
  1. Board & Shareholder Resolutions (or if an LLC, yeah, none!)

Shareholder Resolution - Legal Document Resolutions are also for internal corporate purposes. A corporate resolution is a legal document that is nothing more than a piece of paper that is signed by either the shareholders or board of directors stating they have voted in favor of what was authorized at the meeting and/or what was agreed to at the meeting.   By law, some corporate matters require a shareholder vote.  These corporate matters include such things as, the change of the company name, or the change of a term (such as, par value) in the Certificate of Incorporation. Most corporate meetings don’t actually happen in person.  According to state law, if there is a majority consent, a meeting isn’t necessary at all; in that scenario, the shareholders or directors would sign a “written consent in lieu of a meeting” resolution. In addition, most states require, at a minimum, that corporations have an annual board and an annual shareholder meeting.  In most states, these annual meetings are allowed to happen by “written consent in lieu of a meeting”.
  1. Corporate Book and Seal

Corporate book and seal - Legal Document It is always a good idea to get a corporate book and seal.  The book will hold all of your legal documents and all of your vital corporate documents safely in one place.  It also makes finding your documents a lot easier.  So go ahead and put your “Filed” Certificate of Incorporation, Bylaws, Resolutions, Stock Ledger, Stock Certificates and other important legal documents safely in one place, your corporate book. Here are a few websites were you can buy a corporate book/kit: www.CorpKit.com www.Blumberg.com www.corpconnect.com
  1. Business bank account

Blank company check - Legal Document Open a separate bank account just for your business.  You will need your “Filed” Certificate of Incorporation as well as your new EIN. Here are a couple of TIPS for your business bank account:
  • Deposit any and all of your business money into your business bank account
  • NEVER deposit business money into your personal bank account
  • Pay all of your business expenses with your business bank account
  • NEVER pay any of your business expenses from your personal bank account
  • Reason for NOT Commingling: One of the benefits of forming a legal entity is the personal liability protection it affords you.  The legal entity protects or shields your personal assets.  So, for example, if someone sues your business for failure to pay a business expense, legally, they cannot go after your personal assets to pay for that business expense.  Now, if you commingle or mix together your personal assets with your business assets, then the law typically will “disanull” your personal liability protection (pierce the corporate veil) because it no longer sees a difference between you and your company.  Therefore, if you commingle, your personal assets are no longer protected and a litigator could go after your personal assets to pay for that business expense.
  • Try not to pay any bank fees. Sometimes if you open a business savings account along with a business checking account, the bank will waive their fees.  Be on the look out for low or no fees bank accounts.
  1. NDA – Non-Disclosure Agreement

Non-Disclosure Agreement - Legal Document The NDA or Non-Disclosure Agreement is a legal document, or agreement, that prevents others from disclosing your proprietary and/or confidential information about your business. So, before you go and share all of your wonderful and unique ideas, dreams and goals with others, be sure they sign an NDA; don’t share anything until and unless they sign it.  If they don’t want to sign it, then you may want to think twice about sharing anything with them or doing business with them.
  1. Stock Ledger and Stock Certificates

Stock Transfer Ledger - Legal Document The stock ledger will show who owns your company.  The stock ledger tells you how many shares have been issued, to whom and when. Each time shares are issued, whether initially when forming your business, or afterwards, each transaction should be entered in the stock ledger. Treat your stock ledger like your bank account ledger.  Every entry should be recorded.
  1. Stock Certificates

Google Blank Stock Certificate - Legal Document The Stock Certificate is a legal document that evidences ownership in the company. If you have several owners, it is always a good idea to give the original to your owner/shareholder, and keep a copy of that stock certificate with your stock ledger. The stock you issue is like money.  Be very wise to whom you grant, give or sell your stock to.  It’s not always easy to remove or buy-out an owner/shareholder; it’s a lot easier to remove an employee.
  1. Certificate of Authority to Business in Another State

Certificate of Authority to Do Business - Legal Document If you plan on conducting business in a state other than the state you formed your company, you will most likely need to file a Certificate of Authority to do business in that other state.  The Certificate of Authority is a legal document that gets filed with the Secretary of State. Once you have received your stamped “Filed” Certificate of Authority to do business, put it in the corporate book with your other legal documents for safe keeping.  In addition to being able to do business in that state, you will most likely have taxes to pay in that state.

FURTHER ADVICE – Get a Business Lawyer

Business Lawyer - Legal Document You should seek out a business lawyer for the drafting of all your legal documents.  The drafting of your legal documents is critical to the success of your business and the ability to withstand any legal attacks. So, seek out a competent business attorney before starting your new business and if you are an existing business, then hire one before undertaking major changes or transactions affecting your business that may or may not require additional legal documents. You should, for example, consult your business attorney if you are considering any of the following, which will most likely result in the need for additional legal documents:
  1. Doing business in a new state.
  2. Admitting one or more new owners.
  3. Selling or otherwise transferring a majority of your company’s assets.
  4. Merging into any other company, or having any other company or other entity merge into your company.
  5. Having an owner acquire shares from another owner.
  6. Amending the certificate of incorporation or bylaws.
  7. Dissolving and winding up your company.
  Please feel free to provide your comments below.  Ask any questions you may have. In addition, if there is any topic you would like me to research for you, just put that in a comment below.  Would love to hear from you. I appreciate the opportunity to be of service to you and hope you enjoy my blogs!    
BizandTravelBlog.com is published by Virginia K. Sourlis, an attorney licensed in the state of New Jersey. This site does not provide legal advice and it does not create an attorney-client relationship with anyone. This should not be considered legal advice. You should seek an attorney for your own situation. This website is for informational purposes only. Any and all views and opinions expressed on this site are solely those of the author and do not reflect the views of Virginia’s law firm. BizandTravelBlog.com is not associated with any organization, group or institution, unless otherwise specifically noted.
I have not received any compensation for writing this post. I have no material connection to the brands, products, or services that I have mentioned. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”
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