6½ More Things You Should Do To Be Fully Protected After You File Your Articles
1. For Corporations: You have to elect directors and officers, hold an organizational meeting, issue stock and adopt by-laws. These are all required by statute. If you leave them out, you run the risk of not having limited liability.
1.5 For LLCs: Consider adopting an Operating Agreement (not required by law). The Operating Agreement has information on how the company will be run, similar to by-laws of a corporation.
2. Get an EIN (federal tax ID number) in the name of the business.
3. Open a business bank account. Do not commingle your personal funds and your company funds. The company is a separate legal person from you, and you have to treat it with formality. Pretend you work for a big corporation and have to turn in an expense report and receipts in order to get reimbursed for your mileage, office supplies or continuing education classes. Make sure you are paying yourself a salary and not just dipping into the till when you need cash.
4. Get appropriate insurance. What you need and how much will depend on the kind of business and risk. Start with your personal agent, but you may need someone who specializes in commercial law.
5. Draw up standard Terms & Conditions in a contract or purchase order that protect your business. Make sure you pay attention to the warranty, limitation of liability and indemnity. This is where you could be open to huge unrecognized expenses in a worst case scenario.
6. If there are two or more owners, get a Buy-Sell Agreement and fund it with life insurance and disability insurance. Things are peachy now, but if a problem arises, you and your partners may be too emotional to think clearly about how to resolve it. A buy-sell agreement sets forth what triggers one partner buying out the other and how to calculate the price. If there is no buy-sell agreement, there is very little the law can do to resolve the impasse and get one partner out, other than dissolving the company. This agreement is usually in the form of a shareholders’ agreement for a corporation and in the operating agreement of an LLC.