When was the last time you looked at, let alone reviewed, your company documents like your Articles of Incorporation, Bylaws, Operating Agreement, or Partnership Agreement. Of course, depending on your situation and how long you have been around, you should also have a few Resolutions, Minutes of your Board and Shareholder meetings, perhaps a Buy-Sell agreement, a Shareholder Agreement, Stock Certificates, and so on.
Types of Businesses
There are three types of businesses generally. First, there are businesses that were formed with a minimalist approach. They have whatever was required by the Colorado Secretary of State, but nothing more. This probably makes up the mass majority of businesses, but it is often indicative of a business owner that is not yet serious about their business.
Second, there are businesses that take their structure and entity status very seriously, making sure they have all of the right documents and keeping those documents up to date. These businesses are much rarer, but their owners are often more serious about their business. For example, they want to get it right because they want to protect and preserve what they have created, and often, there are outside eyes looking in.
Third, there are businesses that took the formation process seriously, but got distracted as they went from a startup to a more established businesses. They might have gained and lost an owner here or there, and they may have been too busy growing the business to worry about the company documents. These businesses fit between the minimalists and the super-serious businesses. They are often over fifteen years hold and are doing well, but have essentially ignored their documents as they have outgrown them.
…15 Years Later
Unfortunately, what happens is that something unexpected comes up, something great or terrible, and the owners have to figure out how to handle the situation, only to discover that they are bound by their company documents which have not kept up with the business growth, or the practical operations. Originally, the business owners did not want to spend the money on addressing situations that, at the beginning, sounded like highly unlikely contingencies. But fifteen years later, they learn that they are facing those very situations , but they haven’t done anything to prepare. How time has flown by.
It is very important that, before things change too much, and when they have the ability to invest in their business, that owners include updating their documents and reviewing the business structure, as well as the owner obligations, rights, and expectations built into their documents. By doing this, owners take control of the destiny of their business and facilitate their success.
A Regular 3 Year Review
We recommend that business owners review their documents every three years as a part of a regular and routine business review. This not only helps owners take care of their businesses interests, alleviate risks, and keep informed about the best practices, it helps business owners to be strategic in all of the areas of their operations, growth, and management.
If you have not reviewed your business documents in over five years, give us at the Griess Law Firm a call to discuss how we can help.