Starting a new business is one of the most exciting moments of your life. It’s natural to be bursting with enthusiasm and raring to go. But as Winston Churchill said, “He who fails to plan is planning to fail.” Making sure you have all the legal documents needed for your business is crucial.
Whether you’re a solopreneur or the founder of an organization with a team of employees, having the right legal forms in place is crucial. These documents serve as protection for everyone involved in a business, from the owners to employees, and even customers.
Not having the correct legal forms for your business means exposing yourself to legal risks and liabilities. Not only could this have a damaging effect on your business, but you could also end up in trouble with the law for not complying with your responsibilities as a business owner.
The 10 Essential Legal Forms Needed To Start Your Business
Setting up a new business can be overwhelming, especially when considering the seemingly endless lists of forms and documents, relating to trading, tax, and employment.
Here, we will break down the ten most important legal forms for you as a new business owner:
1. Business Plan
Although a business plan may not technically be a legal form, it is an essential aspect of starting your business. After all, having a precise and well-thought-out plan ensures that you don’t miss a step when it comes to the legal forms you will need.
Your plan should cover your business strategy, financial goals, and projections, and should also consider the area of focus for your business.
- Will you have employees?
- Will you need premises?
- What financial support from banks will you need?
Answering these questions in the form of a business plan will allow you to stay on track for success.
2. Articles of Incorporation
If you’re starting a corporation, then you must file these legal documents with the Secretary of State or the equivalent agency in the state where your business is. These forms establish your corporation as a separate legal entity to you as an individual and provides you with corresponding legal protection.
Articles of incorporation generally include your business name and purpose, information about stocks and shares, and the board of directors and incorporators. Once these documents have been filed and accepted, the corporation is allowed to start doing business.
3. Operating Agreement
If you wish to form a limited liability company (LLC), then an operating agreement is an important document. It isn’t a legal requirement, but it is an essential form for any LLC as it provides information and clarity about the ownership structure, roles, and responsibilities of the company. It’s there to protect all members of the LLC.
The operating agreement provides key financial information such as the capital contributions of each member. It also sets out the allocation of profit and loss. It protects members by setting out procedures for the transfer of ownership and asset distribution in case of dissolution.
The content of individual operating agreements will vary according to the needs and structure of the LLC in question. We recommend taking professional legal advice when drawing up the operating agreement for your LLC.
4. Partnership Agreement
This form is essential for individuals wishing to form a partnership where more than one person is responsible for the business. Working in partnership can be a fantastic way to create an effective leadership team, but a partnership agreement is vital.
A partnership agreement clarifies the roles and responsibilities of each partner, outlining how the business will run. In the worst-case scenario of one of the partners dying or becoming too ill to work, it will outline how the business will continue or how their shares are distributed.
If you wish to apply for loans or financial support, investors will want to look at a partnership agreement to look at roles, responsibilities, and profit distribution. This form will protect both partners in the case of disputes or misunderstandings.
5. Trademark Registration
You will almost certainly devote time and energy to coming up with a unique name, brand, or slogan for your business. If you want to protect this legally, then it’s important to register the trademark.
Trademarking your business name or slogan will prevent other companies from copying or stealing your ideas, and will allow you to retain your unique identity. It’s a complex area of the law, so you should employ an attorney who specializes in this field.
6. Employee Agreement and Contract
Even if you start out as a solopreneur, if you think you might hire anyone down the road, then it’s absolutely essential to have an employee agreement and contract ready. Familiarizing yourself with the necessary documents is essential to not be blindsided in the long run. These forms are there to protect both you as an employer and also the employee.
An employee contract is arguably one of the most important forms that a business owner needs. An effective contract protects employers and employees alike. As your business grows, and now that most paperwork is actually digital, it may be worth considering third-party business tools to manage your contract needs.
The employee agreement will cover all the terms and conditions of employment. In the case of any dispute or misunderstanding over salary or job duties, it provides legal protection to employers and employees.
7. Non-Disclosure Agreement (NDA)
A non-disclosure agreement (NDA) form can be a vital document for new businesses in the USA wishing to protect their confidential information. It can protect intellectual property, such as trademarks and patents, which can take considerable time and money to develop.
Protecting your unique work product gives you an edge in the business world. If your intellectual property is not protected, it could be taken and used by a competitor, threatening your success.
Non-disclosure agreements are also an excellent way to allow you to collaborate with other organizations or outside parties. It means you can maximize outside expertise while being confident that your ideas and information are safe.
This form will help to protect you, your clients, sensitive data, and proprietary information.
8. Purchase Agreement
Any business which plans to sell goods and services needs a Purchase Agreement.
Its purpose is to protect both customers and suppliers by detailing all the terms and conditions of the sale process. It means that should there be any legal disputes over price, products, or payment terms, you have full legal protection.
In an age where sensitive information is regularly emailed and shared online, this is a crucial policy. In recent years, a string of famous companies have faced massive fines for data breaches, highlighting the need for a focus on privacy.
Along with ensuring your business has every form necessary for its legal, financial, and commercial purposes, there is the small matter of storing these forms in a secure cloud-based format. Many organizations look for tools to compress PDF forms to store them online.
10. Business License
Having a business license when starting a business in America is important for several reasons. Depending on the state your business is operating in, it may be a legal requirement to have a business license. Even if you are in a state where it is not a legal requirement, it will add credibility, providing reassurance to your customers.
A business license can also open doors to funding opportunities provided by state and federal government programs. As a new business owner, it would be a shame to miss out on available resources!
This is not an exhaustive list of legal forms and documents. It would always be recommended to take professional advice when setting up a new business and to take advantage of tools such as a free online PDF editor to make managing your documents easier.
Once you have your legal forms in place and your financial documents stored safely you can rest assured your business is protected. Now, you can really focus on moving forward with your business plan to create a successful future for your new venture.