Starting a new business can and should be as exciting as it is challenging. Entrepreneurs, while operating a new business, tend to start everything from scratch and plan critical accounts for the future of the business. They are likely to spend countless hours developing and fine-tuning the business idea, preparing to bring potentially rewarding concepts to market with great anticipation. Estate planning is an important element for entrepreneurs to consider. While operating a business, you need to ensure that the estate plan is one that adapts to the changing circumstances. Having strong, structured and well-drafted legal documents in place will protect a startup from launch, through growth and all the way to acquisition. Legal document management is an important and time-consuming process that involves diverse tasks like scanning, indexing, conversion and digitizing. An experienced legal process outsourcing company can help convert legal records into easy-to-manage file format.
As mentioned above, for the business and other related assets to flourish for years to come, it is important to have all the legal documents and a business continuation plan in place, in case of any unforeseen events happening to the business. Documents such as master files, wills and trusts specify how the business affairs should be handled. Creating these documents and utilizing a notary signing service is critical to ensure the future of business. Here’s a list documents required for handling estate planning and legal documentation –
- Business Plan – A business plan helps the entrepreneur to plan and make critical business decisions. It states the goals and objectives of the business and how the entrepreneur seeks to achieve such goals. In addition, it helps keep track of the progress and growth of the business and offers clarity on how to pursue opportunities for growth and expansion.
- Successor Planning – Choosing a successor is one of the initial steps when planning a company’s future beyond one’s lifetime. Often, this can be a complex step, particularly if it is a family-run business. While the successor position for a business may often be reserved, it is important to consider the individual’s experience, qualifications and ability to run the business in an efficient manner in the future. Deciding on a successor in a legal document is the safest way to dictate the fate of the company. A will or a trust (or both) are documents that will allow people to legally designate a company’s successor via a national notary or nationwide signing services.
- Master File/Operating Agreement – Regarded as one of the important documents a business or entrepreneur needs to draft, the master file contains key information necessary to operate the business. An operating agreement is a legal document outlining the terms of a limited liability company according to the specific needs of the owners. Typically, it states the obligations, duties, and responsibilities of the business owners to the limited liability entity. This document guides the internal operations of the business from the business’ financial, functional to administrative decisions. An operating agreement protects the status of the company and clarifies verbal agreements between the business owners. Having all of these documents will make the transition smooth for the successor and allow for the continuity of your business.
- Will – Creating a will is another chief aspect of estate planning for entrepreneurs. With an objective to secure the future of the business and its assets, it is important to decide on the successor who will be handling the business and financial assets in the future. To create a will, you need to draft a list and find an organization that offers notary signing services to make it a legally binding document. A will has the advantage of reducing the burden of estate taxes and maximizing the funds available to the successors.
- Living Trust – As a will is a form of protection of the assets, it is also important to set up a trust to further designate the distribution of the property and business assets. A trust can be used to plan how an inheritance will be distributed among the legal heirs or beneficiaries. It can also be used to distribute the assets in phases and eliminate the costly impact of probate. While a will is more suitable for handling personal items, a trust is the best way to handle business assets. Apart from a living trust, entrepreneurs have several other options to suit their circumstances. For instance, a special-needs trust can provide funds to pay for the future medical fees of disabled loved ones.
- Power of Attorney – Even though a will and master file will clearly designate the person who is likely to continue or run the business, or inherit the assets, it is still important to grant a person the right to access them. Bank accounts, property and securities are all items that require an individual who has been granted the power of attorney in order to receive access. State laws involving this process vary from state to state, with some states simply requiring a verbal agreement or a self-written document. On the other hand, other states require that a signed power of attorney be notarized.
- Partnership Buyout Agreement – Many businesses function on a partnership basis. If you are not the sole owner of a business, it is important to set guidelines with the partners for what will happen after the death of a partner. Recording partnership deals is an important aspect in an agreement, which will act as a strong piece of evidence in case of any legal disputes. Often, a partnership agreement includes details such as the names of the partners, their contributions to the business in all terms (money, land, or equipment), duration of the partnership, division of labor and authority, and more. A buyout agreement will lay out the proceedings in the event of the death of a partner, it will also handle situations in which a partner resigns or is no longer able to run the business due to a health issue. For instance, if there’s any kind of disagreement between the owner and the partner, without a buyout agreement in place, the government may choose to dissolve the partnership and force the remaining partners to divide the company’s assets. Drafting a buyout agreement will designate exactly how much a former partner is owed or whether or not they will continue to have a claim to the company.
- Certificate of Registration/Incorporation – Regarded as a primary legal document for any business entity, a certificate of incorporation or registration shows whether the business is registered under the appropriate authority to conduct business. A certificate of incorporation is a legal document and shows the business is set up following the provisions of the law. It recognizes the business as a legal identity distinct from the entrepreneur. Therefore, the law gives the business similar rights as a person recognized under the law. A business registering as a company receives a certificate of incorporation, while a business registering as a business name receives a business name certificate.
The right legal documents can help avoid many of the problems that could derail the continued functioning of a business. Being careful with legal documentation is key to ensuring that the business legacy remains protected in the future. In one way or the other, all the above-mentioned legal documents are important for a business. Therefore, it is important to take adequate time and effort to create the above-mentioned documents so that the legal beneficiaries get to enjoy the profits of the business for years to come. Professional legal data entry companies can help digitize confidential data and store it in the required format.