As a business professional, you might think that your only duties are to innovate the marketplace, strike lucrative deals and travel the world to meet people in the right places. Well, unfortunately, there is another more mundane task involved in running a business: paperwork.
Business documents might be an innovative entrepreneur's kryptonite as he or she attempts to change the world. Indeed, you are trying to change the world, so what time or inclination do you have to devise a memorandum of understanding or sign liability release forms? That is part of the job. Since it is something you can't run away from, it is essential to know what the types of forms and certificates are needed and the legal parameters you need to operate within.
We have compiled a list of 19 key business documents every startup or small venture needs when starting a business:
1. Articles of Incorporation
The articles of incorporation are a formal document that legally establishes the existence of your corporation in any jurisdiction. Also known as a corporate charter or company registration, the articles of incorporation contain the company's name, street address and the agent of service. It serves a wide array of purposes, including tax benefits, protection from creditors and a formal acknowledgement for investors to breathe a sigh of relief.
2. Operating Agreement
An operating agreement is a legal framework that outlines the ownership and member duties of your company. Otherwise known as a founders' agreement, this business document essentially lays out the financial and working relationships among the business owners. It should contain details relating to ownership, management and members.
Every business expert recommends taking advantage of this document when multiple people are owning and operating an enterprise.
3. Employment Contract
A lot of startups believe that it is not necessary to extend employment contracts to employees or even freelancers. However, to protect yourself and to prevent litigation, it is a good idea to establish a contract of employment to outline rights and responsibilities between the parties involved. Put simply, the contract is between the employer and the employee.
4. Offer Letter
A business will extend an offer letter to a potential employee, listing important terms of the person's employment such as the start date, benefits, and duties. Although it is not an implied contract, it is necessary in order to inform the candidate that they have been selected for employment.
5. Liability Release Form
Whether you operate a storefront or you run a digital property, it's imperative in this day and age to maintain liability release forms for anyone using your product or service. The document involves one party waiving its right to submit a legal claim against another party should damages, such as an accident or an injury, occur. This allows you to protect your business from having to fight a lawsuit in court.
6. Non-Disclosure Agreement (NDA)
Every entrepreneur who has achieved success will concur that the most important business document for any startup is the non-disclosure agreement (NDA). This is a legal contract involving a minimum of two parties that outlines confidential information, knowledge and material that the parties cannot share with a third-party. This is also called a confidentiality agreement and a confidential disclosure agreement.
So, if you have a tremendous business concept or an innovative product that is going to change the world, an NDA restricts somebody within your firm from sharing this information with others.
7. Financial Report Template
Following your official incorporation, you will be required to publish annual financial reports to keep your certification in your jurisdictions. These documents contain your balance sheet, income statement and statement of cash flows. If you wish to maintain a good relationship with your state's or province's corporation commission, then it is imperative to get working on a template and file your annual corporate reporting.
8. Business License
While specific business licenses will depend on the type of business you run, you should still determine what documents you need to ensure you are properly licensed in your city, state or province. For instance, if you have purchased a franchise and you run a restaurant, then you are going to need a liquor license.
Corporate bylaws are sets of rules crafted and instituted once the business has been incorporated. It is a legal document that specifies its internal management structure. According to legal professionals, one of the most common mistakes for new businesses is the failure to establish and implement bylaws that are tailored to your company.
10. Terms of Service
Sure, surveys have found that most consumers do not read the terms of service. But the public's negligence should not prevent you from establishing a list of terms and conditions that the user must agree to abide by to use your services.
Indeed, when you are compiling your terms of service, they should include disclaimers, liabilities and responsibilities of both your company and your customers.
11. Meeting Minutes
Even if you are a small company with a handful of employees, it is a great idea to keep the minutes of your meetings. These are written records of a meeting that contain information pertaining to several things:
- Agreed upon actions
- Accepted or rejected motions
- Voting outcomes
- Postponed items or new business discussed
- Date and time of next meeting
12. Memorandum of Understanding
A memorandum of understanding (MOU) is pretty much a formal agreement version of the handshake or a gentleman's agreement. Many businesses utilise MOUs to launch official partnerships by describing broad agreements between the parties. Indeed, while an MOU is not legally binding, it does carry a lot of weight because it conveys the message that a binding contract will soon be established.
- What personal information is collected;
- How the data is collected and what it is used for;
- Explanations of how users can see collected information;
- Assurance that the data is appropriately collected, safely stored, and protected at all times;
14. Loan Agreement
For startups, small businesses and even large corporations, credit plays an integral part in keeping their doors open, buying a business and expanding operations. Lending will inevitably take place at some point during incorporation. Do you have a loan agreement?
A loan agreement is a legally binding business document between the borrower and the lender that regulates the terms and conditions of the loan, whether it is a facilities agreement or a working capital loan. It should include the value of collateral, interest rate terms and the duration of the loan.
15. Registered Agent
A registered agent is a professional third-party in the same jurisdiction as the incorporated business. This person will receive service of process notices, accept correspondence from the government, and submit official documents. A registered agent document identifies and officially establishes the position within your company.
16. Shareholders' Agreement
Entrepreneurs tend to make the mistake of not using a shareholders' agreement because they find it unnecessary for their startup or small business. However, a shareholders' agreement is critical because it serves as a legal contract agreed to by all shareholders of the company, regulating the way the business is operated. Plus, it can shield the firm from unforeseen circumstances between shareholders that may be triggered by corporate success.
17. Statement of Owner's Equity
What is the value of your business? The statement of owner's equity is a document that highlights the total value of your firm once all the company's obligations have been met. It shows the allocation of capital within the enterprise and the amount of capital the owner or founders have invested. Plus, the profits generated by the business that are usually reinvested into the firm.
18. Human Resources
If you are employing even just a handful of people, you need the necessary human resources documents. While we touched on employment contracts and bylaws, it is also essential to offer workplace guidelines related to performance reviews, employee conduct and job descriptions. The format of these corporate handbooks should be technical, legal and easy to understand. Otherwise, many workers will not be bothered to read through the guidebook.
19. Business Reports
As previously mentioned, you need to compose annual financial reports. But you also need to put together business reports as they are imperative for successful internal management. These reports examine sales figures, safety compliance, marketing plans, case studies and feasibility studies. What makes this effective is that your organisation can also attract new investors since you will include intimate details.
Every business – large or small – is required to attain, complete and submit a whole host of documents. It might be more difficult for your company if you refrain from working on these papers, no matter how inconsequential they may seem.
That said, there are many resources available in your state or province that can guide you to a treasure trove of documents, from a registration certification to many types of contracts. You want to get this done as quickly as possible so you can concentrate on what you do best: innovate, satisfy customer demand and grow your firm.
Can you think of any other important business documents? Share your thoughts in the comment section below!