Key Business Documents

Although each business has its own needs for specific documents, this article is designed to call to your attention certain business documents and types of documents which are of importance to businesses in general.

• ALL businesses-
  • Separate checking account for the business
    • This helps when it comes to tax time
    • This helps in recognition of an entity
    • This helps in management of the business
  • Federal ID number
    • Corporation, and partnerships MUST get its own Federal ID number[1]
      • The business is a “taxpayer”
      • The business often has to file its own tax return
    • Although a sole proprietorship and/or a single owner LLC[2] without employees does not require a FED ID number[3], this helps establish the business name on the IRS records.
  • Contract for goods and/or services
    • No one has been the cause of more lawsuits than “Miss” communication
    • Should be in writing
      • This can be in the “form” of a contract or simply a purchase agreement
      • Should contain
        • Names of the parties
        • What is to be provided by each party
          • Seller
            • What is to be provided in return for payment
            • When it is to be provided
            • Any warranty
          • Buyer
            • Price to be paid
            • When to be paid
          • What happens if there is a problem
  • Confidentiality/Non-Compete. If the business (regardless of the structure) has employees, the employees should be bound by a confidentiality/non-compete agreement
    • Provided the terms are “reasonable” these are enforceable
    • Courts balance the needs of the needs/rights of the employer against the needs/rights
• Sole Proprietorship- Trade Name- Iowa Code 547
  • Anyone operating a business in a name other than the true surname of the owner must file a verified statement “…in the county in which the business is to be conducted”[4]
  • Failure to file the statement is a simple misdemeanor[5]
  • Each day that any person or persons [fails to file the statement] is a spate and distinct offense.[6]
  • This does not apply to an entity which is formed by a filing with the Secretary of State (corporation, limited liability company, limited partnership)[7]
• ALL Multi-owner businesses- Buy/Sell Agreement
  • Triggering events
    • Death
    • Termination of employment
    • Business impasse
  • Pricing
    • More of an art than a science
    • Can be a formula or by agreement
    • Price can depend on the triggering event
  • Payment
    • Can be in a lump sum or over time
    • If death is the triggering event; insurance proceeds can fund payment of the payment.
• Multi-owner LLCs-Operating Agreement[8]
  • Without an operating agreement[9]:
    • Every member has an equal vote in the management of the company/management disagreements are resolved by simple majority vote
    • EACH member the right to enter into contracts which bind the entity
    • UNANIMOUS consent is necessary for sale or merger of the company
  • With an Operating Agreement
    • Management can be limited to certain individuals who do not have to be members of the company[10]
    • Managers (as distinguished from members) have the right to enter into contracts which can bind the company.[11]
• Multi-owner Corporations- Minutes
  • Shareholder minutes memorialize who are the directors of the company
  • Directors minutes memorialize who are the directors of the company
  • Minutes can be used to restrict authorization of individuals to act on behalf of the company in certain matters
  • Minutes can be used to memorialize action by consent rather than as the result of a meeting
  • Minutes should be prepared annually and should contain:
    • Election of officers and directors
    • Authorizations (or ratification) of actions
      • Any “material” or significant transaction should be included in minutes with accompanying authorizations Example: X as president of the company entering into a lease or a loan agreement on behalf of the company.
      • Any “material” or significant personnel changes
      • Any transaction outside of the “normal’ course of business Example: the sale of substantially all of the assets or a merger
    • Any purchases, sales, or issuance of stock

Contact the Kreamer Law Firm, P.C. at 515-727-0900 or at info@kreamerlaw.com if your business has not yet addressed its need for the Key Business Documents described in this article. 

 

 

[1] “Do you need an EIN” on the IRS Small Business and self Employed Website Update 6/14/2016

[2] If an LLC is owned by husband and wife in a non-community property state, the LLC should get a Federal ID number and file as a partnership. “Single member Limited Liability Companies” on the IRS Small Business and self Employed Website Update 6/15/2016

[3] Neither a sole proprietor nor the member in a single member LLC are considered “employees” “Single member Limited Liability Companies” on the IRS Small Business and self Employed Website Update 6/15/2016

[4] Iowa Code §547.1. It can be difficult to determine where the business is to be conducted.

[5] Iowa Code §547.4

[6] Iowa Code §547.5

[7] Iowa Code §547.1

[8] There is no statutory requirement that a limited liability company adopt an operating agreement. In the absence of an operating agreement provision on any matter, the Iowa statute prevails. Iowa Code §489.110(2)

[9] Iowa Code §489.407(2)

[10] Iowa Code §489.407(3)

[11] Id.