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Is There a Business Doctor in the House? Five Business Health Check Points

Categories: Business & Corporate, Article

Check list of mandatory business law needs

People generally don't go into business because they are good at running businesses. Many people go into business because they are passionate about something and they want to share that passion with the world. Whether it's food, fashion, music, technology, or something else, business owners are good at what they do. The mundane realities of running a business, however, are often overlooked or placed on the back-burner. Ignoring the business basics can create big problems. Now is a good time to check-in on the health of your business. Here are five business checklist items to consider.

1. Governing Documents

  • LLCs. Do you have an Operating Agreement? If so, is it up to date? Arizona's new Limited Liability Company Act is effective September 1, 2020 for all existing businesses, and this may impact your existing Operating Agreement. If you don't have an Operating Agreement (and, in some cases, even if you do), the new law will impose certain rights and obligations on members and managers. Accordingly, you may want to create an Operating Agreement, or amend your existing Operating Agreement, now to avoid certain defaults under the new law.
  • Corporations. Do you have Bylaws? Do you have a Shareholder Agreement? If so, when was the last time you looked at either of them? Do they still say what you want them to say?
  • All Entities. Do you have all of the licenses required to operate your business? Making sure that you are operating in accordance with the law is imperative.
  • Special COVID-19 Considerations. Are you in compliance with any state or city requirements governing your business? Have you reviewed and put into place CDC, OSHA and ADHS business requirements for safe re-opening?

2. Employees

  • Employee Handbook. If you have employees, you must comply with a variety of different state and federal employment laws. These laws vary depending upon the size of your organization. Employee handbooks are a good way for business owners to communicate employee rights and obligations and ensure compliance with the law. A handbook must, however, be properly prepared and up to date with current law.
  • Employment Agreements. While you are not required to enter into a formal employment agreement with your employees, there are some circumstances in which one might be appropriate or preferred. Be careful to make sure the employment agreement doesn't violate any applicable law.
  • Non-Compete Agreements/Restrictive Covenants. Companies often wish to restrict what employees can do after their employment with the company ends. Such an agreement may prohibit an employee from competing with the company, disclosing or using the company's confidential information, and soliciting company employees or customers. Whether such an agreement is enforceable depends on a variety of factors, including state law, public policy, and whether the provisions are reasonable. If you have an agreement in place, is it enforceable?
  • Form I-9 – and E-Verify: Employment Eligibility Verification. Are you verifying employment eligibility as required? If not, you need to understand what you can and cannot do in order to become compliant.
  • Wages, Payroll taxes and Withholdings. Are you properly calculating, reporting, and paying wages, payroll taxes and withholding? Are employees correctly categorized as exempt or non-exempt? It is critical that this is done properly. The costs and penalties can be severe.
  • Employees vs. Independent Contractors. Please do not misclassify employees as independent contractors. Businesses often misclassify employees. Sometimes this misclassification is accidental. Other times, it is a misguided attempt to lower operational costs. Misclassification is expensive. If you are not sure whether someone is properly classified, having an experienced attorney make an assessment will likely be cost effective.

3. Operating Documents

What documents do you utilize in the day-to-day operations of your business? Managing expectations is no easy task. Documents can help. No matter the business, one of more of the following documents may prove useful:

  • Customer Agreements. Agreements with customers, clients, or patients help describe the product or define the scope of the service, and set out payment terms, late fees, interest, liability limitations, and more.
  • Waivers. Another way to limit liability is through use of a liability waiver. Depending upon your business, these may be highly encouraged.
  • Leases and Vendor Agreements. If you lease space or utilize vendors, then you are now the customer or client. Leases and Vendor Agreements grant you an opportunity to negotiate terms and make sure your expectations are properly set out.
  • Impact of COVID-19. Business owners must consider or reconsider waivers and Force Majeure provisions relative to COVID-19.

4. Branding and Intellectual Property

As you build your business, it is important to remember that you are building a brand. The last thing you want to do is build a fantastic business with a strong following only to be told you have to change your name. You likewise don't want to be accused of infringement. The best way to guard against this is to protect your intellectual property by registering trademarks, filing copyrights, and prosecuting patents. Has anyone assisted you in creating your intellectual property? What about your website? If so, those parties might have claims to the work created or may have created legal liability for you if the work they "created" infringes on another person's work.

5. Self-Care and Succession

It is important to remember to take time for self-care. Running a business takes a lot of time and energy. It's never a 9-5 job. But, business owners often feel as though their business can't run without them. If that's the case, then staying healthy is good for business. A true sign of success however, is when the business can run without you in the event of your death, disability, or retirement. Have you planned for that? In terms of self-care, having a succession plan can provide peace of mind. Hastily prepared succession plans created in a time of crisis are rarely as effective as people might hope. Thoughtfully planning for the future is the best gift you can give to all of the people dependent on your business – your employees, your family, and you!

The good thing is, even if you are not passionate about all the legal stuff, we are. Stay passionate about your business and delegate the rest to advisors who can alleviate some of the burdens of running a business. Retaining a business law attorney will allow you to focus on what you’re passionate about and really good at!


About the Authors: Stephanie Fierro, Nichole Wilk, and Lisa Paine are all partners at the Phoenix law firm of Jaburg Wilk in the corporate transactions and business planning group. Beth S. Cohn is a State Bar of Arizona certified tax specialist, CPA, business attorney, chair of the corporate transactions and business planning group, and shareholder at the firm. This group of attorneys assist clients with various business matters.