Building your small business on a solid legal foundation is as essential as building a physical structure on solid ground – a weak foundation (whether physical or legal) may result in the business crumbling. So what can you do to build your small business on a solid legal foundation and eliminate future legal headaches and intra-corporate disputes? The following list of five items should be among the many legal issues you consider when starting a small business as a limited liability company (“LLC”):
1. Will the LLC be run as a member-managed LLC or a manager-managed LLC?
2. How will the LLC address fiduciary duties? For example, will the LLC seek to impose strict fiduciary duty principles or will the LLC seek to restrict fiduciary duties?
3. Will the LLC allocate profits and losses based upon the members’ respective capital contributions or percentage of ownership?
4. Will the LLC indemnify its members, managers, and possibly employees? If so, what limitations, if any, will be put in place?
5. Will the LLC provide advancements for legal expenses? If so, to whom? Employees? Members? Managers? Agents?
These are just five of the many legal considerations a small business owner or prospective small business owner should consider to avoid future legal troubles and intra-corporate disputes. To receive five additional legal considerations, please feel free to send me an email at mckinney @ brownwinick.com.
It is important to remember that laws on these issues can vary from state to state and from one business entity to another. To obtain information specific to your business and goals, you should contact a licensed attorney.
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