At DHN Attorneys, we often represent first-time entrepreneurs who are either looking to start a new business or even purchase an existing one. This is an exciting time for anyone, but the decisions you make at this juncture will greatly affect the success of your business.
Of course, any attorney will tell you that the sooner you get an attorney involved, the better. However, in reality, with so many other expensive decisions being made and with a wealth of information and forms available online, many new entrepreneurs will often try their own hand at setting up their new corporate entities. It's simple enough to do the online filings with the Florida Division of Corporations, but those filings whether it be incorporating (for a corporation) or organizing (for a limited liability company) do not properly manage the risks involved with business ownership.
Purchasing or starting a business will likely be one of the most time and cost intensive investments of your life, and the rewards of a successful business are innumerable. Therefore, before you go down that road, you must do your due diligence. Obvious things to consider include the market for your product or service, any existing competition, and the costs of owning and operating the business.
If you are purchasing an existing business, aside from your research prior to entering into the contract for sale, your contract should provide you with a reasonable opportunity to review everything related to the business (or if it's a commercial property, the operation of the property itself) prior to your deposit going hard. You should always pay special attention to the financials of the company, including accurate and up-to-date profit and loss statements. Additionally, a balance sheet showing all the assets and liabilities should be requested. If appropriate, you should also carefully review (with counsel) any leases or liens affecting the business or property.
Probably the most important one, which is often overlooked also, are any corporate documents and records, which leads us to our next consideration.
You can find any number of forms on the internet, but just be aware that every business is unique, and you might not find what you need with boilerplate templates.
People will often create corporations or LLCs by simply doing the online filings on Sunbiz.org which are only the articles of incorporation or organization. To properly manage your risk and limit liability, you should have proper Bylaws if you're a corporation or an Operating Agreement for your LLC. Additionally, if ever you're looking to get a loan for your company, any lender would request those as well.
These are written agreements between partners and/or shareholders which can help set expectations and prevent future lawsuits. These can describe in detail when meetings must take place, what the board or manager is authorized to do without consent of all others, how a partner or shareholder can transfer or sell their shares, etc. You can find any number of forms on the internet, but just be aware that every business is unique, and you might not find what you need with boilerplate templates.
Last, but above all else, you have to give careful thought as to how the day-to-day operations of the business will be handled. This can be accomplished via the Bylaws for the corporation, for example, which could set forth that a President, elected by the Board of Directors, will manage the affairs and act as the chief executive officer. Similarly, the Operating Agreement for the LLC can set forth that a manager (which can be one of the shareholders) has that same authority. Or you can require all business decisions and actions be authorized by 100% of the shares of the business. Or you can hire as an employee full-time manager whose salary is paid by the business but who has no ownership stake.
You can also consider compensation for officers or managers. Perhaps you want to commit people to non-compete agreements if they're an employee. What happens if there's a deadlock between partners? Is there an exit strategy? There's a lot at stake here!
At the end of the day, we don't anticipate many of our clients retaining us before they're deep into negotiations or even close to opening the doors to their new business. We are prepared to step in at any stage of the process. We just want you to know that it's dangerous to go at it alone. Let us help!