Good Business Records Can Save Your Business
By Lane V. Erickson, Idaho Business Attorney
One of the purposes of using a good business attorney is that you have someone making sure that you are following all the required laws and regulations associated with your business. I mean, really, the last thing you want to do is break the law when it comes to operating your business. This leads to nothing but stress, and it can also lead to costly penalties and fines.
The good news is, that most people don’t need to worry about breaking the law. Rather, and more importantly, most business owners should be thinking about the things that they can do to enhance their business and make it more successful. Additionally, most business owners would benefit from having a well-thought-out business plan that includes all of the corporate records that they need to keep so their business can operate smoothly.
Our team of Pocatello business lawyers are premier in helping clients with all of their business needs. From the creation of a business, through the operation of the business in all aspects, and even if the business comes to an end through dissolution, our attorneys are experienced and knowledgeable and can help you do things correctly.
At Racine Olson, we use a team approach to help each of our business clients succeed. Our team of Pocatello business attorneys includes partners Lane Erickson and TJ Budge, and attorneys Nate Palmer and Dave Bagley. All of the attorneys on our team have earned the highest rankings and ratings possible from all legal reporting services including AVVO, Justia, and Martindale Hubbell. Each of our attorneys are skilled and can assist our Pocatello clients meet all of their business needs.
The purpose of this article is to describe how important business records are and to describe some of the reasons your business should keep good records as part of your operating. Keep in mind that no single article can answer every question. If you have particular concerns, please call us to schedule a free 30-minute consultation where we can answer your specific questions.The Corporate Shield
Perhaps the most important reason that your Pocatello business should keep good business records is so that you can maintain the corporate shield that exists when the business is created. The corporate shield is a fancy phrase lawyers use that simply to describe the law that allows the individual owners to be shielded from the liabilities that arise in the business.
For example, if the business obtains a loan from a bank then the borrower is the actual business itself rather than the individual owners. So long as the individual owners don’t sign any type of a personal guarantee for the loan obtained by the business, then the individual owners are not personally responsible to pay that loan back. Only the business itself has the obligation to pay the loan back.
Additionally, if your business is a retail operation that is opened to having people on the business premises, such as customers, or suppliers, The corporate Shield will protect the individual owners from any liability That arises due to personal injury. For example, suppose that your business is a floral shop. You have people coming in all the time to buy flowers. If a customer came in and slipped on your floor and was heard, so long as you did not intentionally injure them, any liability that exists for this personal injury rests solely on the business itself.
One of the ways that you can lose the corporate shield or this individual protection from the liabilities of the business, is if you do not keep good and accurate corporate records. More particularly, if you mingle your financial operation from the business with your personal finances, these records will allow the corporate Shield to be pierced so that liability could rest with the individual owners rather than being shielded by the corporation itself.Controlling Ownership Interests
Another way that you can protect your Pocatello business is by making sure that your corporate records reflect who the owners of the business actually are. For an LLC, a simple operating agreement allows business owners to establish at the start of the business who the owners of the business are and the percentages of ownership each of them holds.
Additionally, at any time the owners of the Pocatello business can agree to change the ownership interests. Also, the owners of the business can agree to allow the new owners to come into the business as additional owners. When this happens, these documents again control who these people are and the percentage of ownership each of them has in the business.
Without these kinds of written business records, the law presumes that each owner of the business owns an equal interest in the business. In other words, if there were three owners in the business each of them would own one third. Alternatively, if there were five owners in the business each of them went own one fifth. In reality, this is not how it always works. Sometimes there is a majority owner in the business and some minority owners as well. Again, it is only through the business records that the actual owners are identified, and the percentages of their ownership interests are established.Controlling Management of the Business
Finally, another issue that comes up often when it comes to Pocatello businesses is how they are managed or controlled by the owners. In other words, who has the ability to make operating decisions for the business.
Without any type of business records, the law presumes that all of the owners must be involved in making business decisions. In other words, there has to be a majority of the owners who agree to take some action or do some business operation for it to legally happen. This means that all the owners have to be involved all of the time, and all of the business decisions that are made. For some owners this is totally fine. However, for others, they simply wanted to be an investor in their business and not be involved in the day-to-day operations.
With written business records, the owners can designate one or more persons to be the manager(s) of the business. This person would be tasked with the responsibility of making the day-to-day decisions that would keep the business operating. These business records can place limitations on the types and kinds of business decisions made or on the dollar amount involved in these business decisions so that bigger decisions could involve more of the owners.
The bottom line is that if you own a Pocatello business, having a written business record is the very best way to make sure that your business is being managed the way you want. This brings Law and Order to the business operations. Without written business records, sometimes operating a business feels like the wild west.
If you have questions or concerns about your Pocatello business, we encourage you to contact us. We have assisted numerous Pocatello business owners that we are confident that we can help you too.Enlist a Pocatello Business Attorney to Help You
Our team of Pocatello business lawyers can help you with any of your business structure or operation needs. We are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a free consultation. You can also email us directly at firstname.lastname@example.org or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho business problems.