Your Legal Health Check-Up: Entities, Governing Documents & A BIG TRELLIS ANNOUNCEMENT
The performance of your business is akin to your physical health. When you’re sick, you’re not operating at your best, which is why we recommend frequent business legal check-ups too. Maybe the idea of pointing out more to-do’s is stressful and sounds expensive. We totally get it. Trellis Legal is small, and we know the constant challenge of operating an independent business.
And we know we’re biased, but here’s the thing - legal is important because a little money now can save a lot of money later. However, we believe in meeting your business where it is, which is why we’ve been hard at work to make our legal services even more accessible so to-do lists seem more doable.
COMING SEPTEMBER 1ST: AN EVEN MORE COST-EFFECTIVE WAY TO LEGAL SERVICES
ON SEPTEMBER 1st, we’re launching the Trellis Template Library™ an innovative new way to offer affordable LLC operating agreements, basic legal documents, and more. In short, we got you!
With instantly downloadable templates, detailed instructions, and easy fill-in-the blanks, DIY legal can be way less scary, and it’s a way for us to establish a relationship that will grow with your business but meets you where you are now.
In the meantime, we’re focusing on assessing your pain points and getting your ducks in a
row so you know what documents or legal tune-ups you need. Let’s start with entity formations.
Forming an Entity
The first step to protecting your business, is having an entity that officially separates you, the person (or the multiple owners if that is the case), from your business. Having an entity like an LLC, corporation, cooperative, or other structure provides legal protection for your personal assets, aka “limited liability.” This means only the business assets are at risk in a lawsuit or financial claim, not your personal assets.
Also important to know- if you don’t have an entity and are operating a business under a name other than your personal name you need to have an entity or a fictitious name (also known as a “Doing Business As (dba)”). Sometimes a fictitious name is more expensive than filing an entity (if you need one to operate a business without an entity), so it may be better to explore an LLC or corporation. (We’ll cover dbas more in the future).
An entity protects you from liability, makes your business more legit, likely makes you more eligible for grants and loans, and provides structure for growth (it also makes it easier if you have multiple business owners or investors).
For More Trellis Resources on this Topic: Check out our What Is an LLC blog post. For other types of entity formation, just reach out!
The Importance of a Governing Document
Having an entity is important, but so is having the proper governing document. If you don’t 1) operate your entity truly separately from yourself and 2) have the proper documentation, then someone who sues you may be able to get past the limited liability to your personal assets by arguing you are not separate from the business.
Different types of entities require different governing documents. An operating agreement is the appropriate document for an LLC. Bylaws are for corporations or non-profit corporations. A partnership agreement addresses multiple people working together without yet forming an entity (though remember no entity = no limited liability). Make sure you have the right governing document in mind.
A governing document is important even if you are a single owner, but it’s even more important if you have multiple owners. It outlines crucial considerations such as how decisions are made, profits are divided, what happens if someone leaves or needs to be removed from the company. It’s essential to have these agreements in writing to help things run smoothly and avoid ugly and costly disputes.
For a deeper dive, check out our blog post on Operating Agreements if you have an LLC and feel free to reach out if you aren’t sure if you have one.
Want a checklist for your legal health check-up?
Sign up for our Resources Mailing List, and we’ll send you the full list as a download [it even has little boxes you can check off ;) ] as well as our new August Resource - Client Contracts 101!
DISCLAIMER: This blog post is meant for informational purposes only and does not constitute specific legal advice or create an attorney-client relationship. Readers should discuss their specific situation with an attorney.