Our last post focused on preparing a business for the prospect of sale some day. One of the key considerations when preparing a business for sale is building a strong legal infrastructure to safeguard the business assets.
You shouldn’t wait until it’s time to sell the business to prepare for transition in your organization. Securing your legal infrastructure and consistently revisiting your methods will not only ensure your business will be ready to sell, but it will help position your business for the changes which will inevitably occur.
The legal infrastructure will vary somewhat depending on the nature of your business and the complexity of your operation; however, here are four necessary steps to ensure your assets will be protected as much as possible:
Step One: At least annually or periodically, analyze and update your operational and legal documents to ensure that they reflect the needs of the business. This entails looking at and potentially amending your LLC Operating Agreement, Corporate Buy-Sell Agreement, By-Laws, Independent Contractor and Supplier Agreements, Trademarks, Copyrights and Non-Disclosure Agreements. Make sure that they address all foreseeable issues and potential pitfalls, and consist of back-up plans in the event things don’t go as planned. These documents need to be customized to fit your business like a well-tailored suit. What works for one business may not work for another, even if they are similar. Consult an attorney to find what will fit your business best.
Step Two: Identify your key employees, members, managers, and other decision makers and empower them with the knowledge, authority and ability to carry out the operations of the business. It’s also critical to build in appropriate checks and balances in your management structure to prevent or address negligent and intentional acts which could harm the business.
Step Three: Establish “best practices” with your customers, suppliers, contractors and employees. These practices should create win-win scenarios which will motivate others to do business with you while protecting your brand, reputation and products and services. The practices should be laid out in your agreements and be detailed enough to account for all foreseeable ups and downs.
Step Four: Revisit and reassess. Make sure these steps are repeated and updated as needed. As the demand of your customers evolves, market pressures increase, technology advances or changes in ownership occur, be sure to modify your documents and practices to accommodate these changes. Make sure to include your trusted advisors in the discussion and when making decisions.
Although there’s no sure thing, building a strong legal infrastructure will go a long way to protecting your interests and allowing you to reach your business goals.
For more info on building a strong legal infrastructure or if you have questions related to the topic, please contact us at firstname.lastname@example.org.