40 Corporate Law Guidelines Every Business Owner Should Know

Business Formation

Select an appropriate entity type, based on the type of liability and tax that works best for your business. A corporation or a partnership or even an LLC.

File Articles of Incorporation:

File your paperwork with the state to become an official, incorporated business entity.

Create an Operating Agreement or Bylaws:

Determine rules on how an LLC or corporation should be run by its owners so that conflicts over management don’t arise.

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Corporate Governance

Formation of Board of Directors

A corporate should elect board of directors whose function is supervising strategic business decisions and thus providing accountability on its operations  Define Shareholding Rights

Enter a shareholder’s agreement that illustrates rights, such as voting authority, dividend sharing policies among various shareholders.

Set regular meetings:

Board and Shareholder’s Meetings: According to the law, conduct board and shareholder meetings; keep minutes to be part of the corporate record.

Fiduciary Duties

Act in the Best Interest of the Corporation: Be careful, loyal, and acting in good faith.

Succession Plan

Implement strategies for changing leadership to preserve business continuity

Contracts and Agreements

Apply Written Contracts: Terms should always be defined so that there won’t be disputes or misunderstandings.

Key Provisions

Incorporate payment terms, performance expectations, confidentiality clauses, and dispute resolution mechanisms.

Review Contracts Regularly:

Agreements should be current with the laws and conditions of business.

Draft Employment Agreements:

Roles, compensation, and termination conditions will be outlined for both parties.

Implement NDAs:

Use a non-disclosure agreement to ensure confidential business information is kept secure.

Intellectual Property

Register Trademarks:

Protect your brand name, logo, and slogan with the USPTO in order to avoid unauthorized use.

Secure Copyrights:

Original works such as software, publications, and designs are to be protected so that ownership is established.

Apply for Patents:

Protect inventions and innovations from rivals exploiting them.

Protect Trade Secrets:

Limit who has access to proprietary information; use confidentiality agreements.

Monitor for Infringement:

Enforce your rights promptly if there is unauthorized use of intellectual property.

Employment and Labor Laws

Comply with Wage Laws:

Minimum wage, overtime, and record keeping under federal and state laws apply.

Avoid Discrimination:

Do not discriminate against applicants, internal candidates, and in the workplace.

Workplace Policies:

Write transparent employee handbooks addressing behavior, benefits, and grievance procedures.

Ensure Worker Safety:

Comply with OSHA requirements for a safe and healthy work environment.

Categorize Workers Properly:

Differentiate between employees and independent contractors to avoid the burdens of penalties.

Maintaining Compliance and Risk

Annual Reports Filing:

File all necessary reports with the state to keep your corporation or LLC in good standing.

Maintain Tax Compliance:

Pay federal, state, and local taxes as well as ensuring proper payroll tax withholdings.

Implement a Compliance Program:

Review and update policies regularly to comply with applicable laws and regulations.

Avoid Insider Trading:

Prohibit trading based on non-public information and train employees on compliance.

Prepare for Audits:

Keep financial and operational records organized and accessible for potential audits.

Funding and Investment

Understand Securities Laws:

Comply with SEC regulations for fundraising, including disclosures for investors.

Negotiate Term Sheets Carefully:

Outline key terms in agreements with investors before finalizing funding deals.

Prepare for Dilution:

Understand how issuance of new shares impacts existing equity percentages.

Convert Notes Wisely:

Convertible debt is a great flexible option for early-stage financing.

Disclose Risks to Investors:

Communicate transparently to avoid litigations arising from fundraising

Litigation and Dispute Resolution

Establish mechanisms for dispute resolution

Use the mediation or arbitration clauses in the contracts to take disputes outside of court.

React promptly to the legal notices:

Seek legal counsel immediately upon receipt of lawsuits or regulatory inquiries.

Maintain D&O Insurance:

Shield the directors and officers from personal liabilities associated with corporate business decisions.

Comply with Ethical Conduct

Avoid conduct likely to lead to fraud, embezzlement, or any form of illegality.

Prepare for a Crisis

Formulate a strategy that deals with litigations, data breaches, or reputation attacks.

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