Corporate Governance and Formalities
When a firm is created, it is important that rules and processes are dictated with which the new business will be directed and controlled. This is referred to as corporate governance and is an important aspect of a successful business formation. A business’s corporate governance will be outlined in the form of governance documents which can come in a variety of forms depending on the business entity you operate under. However, one thing will remain constant and equal no matter the entity, in that these documents will serve the goal of determining operating rules for the new company. These documents serve many purposes such as:
- Distribution and Salaries – This clearly details the specifics on when and how investors, yourself, and your business partners will be able to take out money from the business.
- Contributions and Ownership – This outlines the responsibilities of work and finances for each owner and how much each owner owns of the company.
- Withdrawal – If an owner chooses to leave the business, this explains any buyout plans or other succession methods that will safeguard your company.
- Decision-Making – An agreed-upon procedure for handling disputes or differing opinions among the partners of the business.
- Death – An organization plan should be in place in the event that a partner dies unexpectedly.
The Intricacies of Corporate Governance in Florida
Corporate governance is defined as a carefully crafted business plan that covers any legal issues that might arise during the operation of a firm. There are a few necessary documents that one must be aware of and understand how to use. Whether one uses all or any of these documents depends solely on their unique business goals and the type of business entity they plan to operate. To best navigate corporate governance, consult with a business attorney for assistance with these agreements and documents. Some of these include:
- Corporate Bylaws – These are often required by states but dictate the overall purpose of a corporation, the amount and type of share and stock classes, as well as details in terms of a board of directors.
- Partnership Agreement – If you plan on running a partnership, this agreement will determine how your company will be governed.
- Buy-Sell Agreement – This agreement explains procedures to be enacted in the company should be a disability, death, or bankruptcy of an owner.
- Operating Agreement – This document is beneficial for businesses operating as an LLC as it helps outline the managerial and financial duties of its members. While this agreement isn’t necessary to start an LLC, it is recommended.
- Shareholder Agreement – If you have shareholders in your company, this agreement will detail the rights and responsibilities for them and any bylaws in how the company will be operated. Again, this agreement is not required but is recommended.
Our Business Law Firm concentrates in Corporate Governance and Formalities and accepts clients in the Jacksonville, Orange Park and Daytona Beach Areas
Corporate governance serves as these guidelines with which players of a business are expected to follow. If any of these rules are violated, it can create unnecessary dispute between shareholders and members of the company. To avoid future legal issues, it is necessary to proactively deal with any violations within the firm, even if it means removing a member. Some common violations include:
- Using the corporation for personal gain reasons.
- Unethical behavior.
- Fiduciary duty breach.
- Not being transparent with members of the corporation.
- Not complying with legal standards.
If there has been a violation of corporate governance within your firm, consult with a business lawyer. An attorney will investigate all suspicions and advise on the best course of action to take against the individual or entity that caused the violation.