"Open minds lead to open doors."
Starting your own business is not an easy task. It requires meticulous planning by understanding the market needs, the current scenario, and predicting the future well. One must analyse if there is a demand in the market and do an in depth study of your competitors.
To start a business an entrepreneur has to invest a lot of money and his time and needs extreme dedication and zeal to kick start their business.
Starting a business is not just about doing research and being ready, there are a lot of legal requirements one need to abide by. As the competition is high, a smallest mistake in putting out the right legal documents could sabotage one’s work.
Here are the Legal Documents you need before you start your business.
Before we talk about the legal documents needed, the first step is that one needs to have a clear business plan- A business plan is a written document describing how businesses plan to achieve their goals. Good business plans should include an executive summary, products and services, financial planning, marketing strategy and analysis, financial planning, and a budget. The main purpose of a business plan is to establish a business focus. The primary purpose of a business plan is to establish your plans for the future, get secure funding and attract executives.
There are many business formats available according to your objective. Fill in all your details and leave no room for error.
1) Business Partnership Agreement
A partnership is a business which has two or more founders. Although each Partnership Agreement differs based on business objectives, certain terms should be detailed in the document, including division of profit and loss, length of the partnership, partner authority, decision making and resolving disputes, percentage of ownership, and withdrawal or death of a partner.
These details must be decided and agreed upon by all the partners who are a part of the business.
There are four types of business partnerships:
- LLC partnership (also known as a multi-member LLC)
- Limited liability partnership (LLP)
- Limited partnership (LP)
- General partnership (GP)
2) LCC Operating Agreement
LCC Partnership is also known as multi-member partnership. A limited liability company (LLC) can have one owner or multiple owners, and are called as members.
Under an LLC, members have a legal shield between their business and personal assets – that means they generally can’t be sued for the company’s actions or debts. However, they can be held liable for the actions of another member, especially if they knew the member was negligent or made management decisions that led to a lawsuit.
The core elements of an LLC operating agreement include provisions relating to management, voting, equity structure (contributions, capital accounts, allocations of profits, losses and distributions), limitation on liability and indemnification, books and records, anti-dilution protections, if any, restrictions on transfer, dissolution and liquidation, buyouts, confidentiality and restrictive covenants, and general provisions such as governing law and dispute resolution.
3) Employment Agreement
Employment Agreement is a contract commonly entered into when a business hires a new employee. This Agreement sets out all of the terms of employment, including job duties, work hours, salary and benefits, annual leave, confidentiality, and various other key terms.
All employment agreements are legally binding on the employer and, therefore, employers are best served by having them drafted and reviewed by an experienced employment law attorney. Contract law is a particularly complex discipline that relies largely on common law, which is law as developed by judges and court cases.
After the probation period, if the employee is selected, he will be presented with these legal documents and the new employee has to sign the documents and confirm that they agree to the terms and conditions.
The terms and conditions of employment include the responsibilities and benefits of a job as agreed upon by an employer and employee at the time of hiring. These generally include job responsibilities, work hours, dress code, vacation and sick days, and starting salary.
4) Non- Disclosure Agreement
Non- Disclosure Agreement is a contract through which the parties agree not to disclose information covered by the agreement. An NDA protects non-public business information. An NDA creates a confidential relationship between the parties, typically to protect any type of confidential and proprietary information or trade secrets. An NDA is a civil contract, so breaking one isn’t usually a crime. However, when breaking an NDA also involves the theft of trade secrets, that can be a crime. One needs to sign documents an promise that they will not disclose any information.
5) Confidential Agreement
Confidentiality Agreement is used when a higher degree of secrecy is required. Non-disclosure implies you must not disclose personal or private information. But keeping confidential implies you are more proactive in making sure information is kept secret. A confidentiality agreement is a legally binding contract between two or more parties, often an employer and employee, in which at least one of the parties agrees not to disclose certain information. These are also known as an NDA or non-disclosure agreement.
6) Sole Proprietorship Business
Sole Proprietorship examples include small businesses, such as a single person art studio, a local grocery, or an IT consultation service. A sole proprietorship is an unincorporated business with only one owner who pays personal income tax on profits earned. Sole proprietorships are easy to establish and dismantle, due to a lack of government involvement, making them popular with small business owners and contractors. The moment you start offering goods and services to others, you form a Sole Proprietorship. It’s that simple. Legally, there is no distinction between you and your business.
You can get these documents easily done. Make sure there are no loopholes and put all the terms and conditions clearly and in line with the legal norms.