• When opening a new small business, the appropriate type of business organization should be utilized. Some examples are: sole proprietorship, partnership, limited partnership, corporation, and Limited Liability Company, etc. Each of these formats have distinct advantages and disadvantages in terms of liability, taxation, recordkeeping, etc. This decision should be made in consultation with an attorney and accountant working together for the client’s best interest.
• Depending on the type of organization chosen, the attorney will prepare the appropriate paperwork for filing with the State or other appropriate governmental entities. Examples are:
1. Corporation: Check for Corporate Name Availability; File Articles of Incorporation with the Secretary of State; Obtain Corporate Book; Draft Initial Resolutions; Draft By Laws for the Corporation; and Memorialize Election of Initial Board of Directors and Officers.
2. Limited Liability Company: Check for Company Name Availability; File Articles of Organization; Draft Operating Agreement.
3. Partnership: Draft written Partnership Agreement.
4. All types of businesses: Obtain necessary licensing for governmental entities such as business licenses needed from the State or municipal entity and zoning approvals, if any.
• Negotiate a lease (or real estate purchase) for the place of business operations. Commercial Real Estate.
• The attorney will draft needed Employment Agreements for key employees or other employees. Such agreements must contain needed confidentiality/trade secret protection clauses and potentially a restrictive covenant within the employment agreement. That covenant must be broad enough to protect the business from future competition from that employee and not be overly broad and ultimately unenforceable.
• Annually update the Corporate Books with entries for annual meetings of shareholders, board of directors, etc. Draft any needed corporate resolutions for the operation of the business. Banks lending money to businesses often need corporate resolutions adopted as part of the process. Make certain annual franchise taxes and other annual requirements are met.
• Provide all necessary advice and be a part of the business’ core group of advisors which may include the business’ accountant and insurance professional, etc. An attorney should provide a “sounding board” for the business in terms of legal aspects of its ongoing operations.
• The attorney will review or prepare contracts to be used in the day to day operations of the business. Those forms must be prepared in clear and unambiguous language. To the extent that the business is engaging in sales of goods or services, those contracts must clearly set forth any warranties that are being provided so that customers fully understand their rights. Also the contract must properly disclaim any warranties implied by law such as the implied warranty of merchantability and/or implied warranty of fitness for particular purpose.
1. Representation of Landlords within Chicago, Evanston and others with a Residential Landlord/Tenant ordinance must be aware of pitfalls for landlords within these ordinances. Prior to leasing any residential unit, all landlords must be fully aware of any municipal ordinances that may lead to problems. Obtain legal advice prior to entering into any such leases.
2. Contracts must have terms that clearly, understandably and unambiguously set forth the obligations of each party to the contract. It is also imperative (particularly in contracts involving the construction trades) to explicitly set forth that any changes in the nature of the work should be approved by both sides in writing and this practice should be followed WITHOUT EXCEPTION. (This will prevent disputes between the parties when payment is being sought).
• Purchase/Sale of business: Draft and Review all contracts and negotiate all necessary contracts to accomplish the sale of the business assets. Real estate contracts and/or existing real estate leases may be involved in the deal. These deals involve negotiation between the parties to the transactions. Again, the rights and obligations of each party should be set forth in clear, understandable and unambiguous language.