Business Formation / Transactional

Starting and Developing a Business

Having contracts and agreements in place at the outset of your commercial enterprise can help to improve operational efficiency, decrease operational expenses, reduce the cost of sales, minimize risk, uncover underutilized revenue streams, and reduce direct labor costs.

The strong start to every business venture also requires an understanding of legal exposure, asset protection, and state and federal tax implications. And a business plan containing well-drafted legal documents is crucial to the success of any start-up.

As a business grows, it will also take on more commitments including, and not limited to:

• An increase in employees;
• Additional commercial borrowing, including bank and nontraditional financing;
• A merger with a competitor;
• New and expanded locations;
• New investors and/or partners;
• New supplier and customer contracts;
• Introduction of a new product or service; and
• Intellectual property that requires protection.

New business owners are often so immersed in their day-to-day activities that they have little time to focus on how to best protect their interests – especially when planning for future growth. Richard A. Schurr knows how to anticipate favorable business interests, identify issues and foster and protect you and your business into the future.

New business owners/partners will be ahead of the game if they consider the following: a shareholders agreement, operating agreement, or partnership agreement that spells out the terms of a relationship among owners/partners. A well-drafted, proactive agreement shields parties from unforeseeable circumstances such as litigation, death, disability and/or divorce of an owner/partner.

Many business relationships begin with unbridled optimism and enthusiasm, but without adequate written agreements. When relationships are later strained or even irreparably damaged due to poor planning or just bad luck, a business often does not recover. With a properly drafted agreement in place, these situations can often be successfully weathered and costly and drawn out litigation can be avoided.

A buy-sell agreement is also one of the best ways to protect new business owners from unforeseen circumstances. These documents fix the methodology for determining the future value of a business, as well as buyout terms and conditions, which will serve to avoid future disputes.

These agreements become crucially important if any of the parties wish to, or are forced to, end their relationship with the business. Buy-sell agreements are also extremely important to have in place when, or if, an owner dies, becomes disabled, or divorces.

An employment agreement can also protect a business from the following eventualities:

• Loss of an employee to a competitor;
• A former employee who threatens frivolous litigation;
• Paying attorneys fees in frivolous wrongful termination suits; and
• When a disgruntled former employee attempts to “borrow” or “threatens to borrow” trade secrets, confidential information and/or intellectual property.

A Step-by-Step Business Formation Illustration

• Set up the most advantageous business structure considering federal and state tax implications (Sole proprietor, Partnership, LLC, LP, Corporation, etc);
• Prepare, and when necessary file documents including an application for a federal employer identification number; Articles of Incorporation / Organization, Bylaws, Operating Agreements / Shareholder Agreements, application for state sales tax number, etc;
• File for S-Corporation status, if appropriate;
• Negotiate and draft buy-sell agreement among the owners/partners, if applicable;
• Negotiate a commercial lease with advantageous and flexible terms;
• Draft and implement employee-policy manual, if applicable;
• Draft employment agreement including non-competition clause;
• Negotiate financing and business credit terms with local banks and factors;
• Draft customer invoices with terms and condition of sale; and
• Set up business succession planning for owners’ families.