By Purple Fox Legal
April 13, 2022
For a business owner, there is no shortage of paperwork that must be printed, filled out, and then filed with entities outside the organization. But, did you know that internal documents are also an important part of your responsibility?
Internal documents are extremely important to business operations and ensuring your company stays on track. And, in this article, some of the major ones will be discussed. This article details documents like operating agreements, bylaws, and shareholders’ agreements to give you a better idea of the internal documents you should consider for your business. Then, we’re giving you some information on better ways of understanding and implementing them.
Some documents, like certain applications or invoices, need to be filed with organizations outside your business. This is because they require approval or some other interaction from another person. Internal documents, however, stay filed within your company itself. Internal documentation covers a wide range of business functions, but its main purpose is to store information and act as an internal database.
Internal documents are beneficial for keeping everyone in one company on the same page and working toward the same goals. Some of the most important internal documents you should know about include:
As the name suggests, LLC operating agreements were designed with Limited Liability Companies (LLCs) in mind. And, these documents are essential to a functional, growth-driven organization.
Put simply, an operating agreement is a legally-binding document that outlines exactly how an LLC operates. It will often cover the specific needs of the LLC, the role each member will play, and the way that the business is structured. The operating agreement is also responsible for explaining how decisions will be made within the organization and the benefits that members get by being involved. It’s easy to see why this is such an important document for LLCs.
Most operating agreements are drafted during the startup phase of a company, and some states even mandate its creation. LLCs who fail to write their operating agreement run the risk of their business falling under the default agreement rules for their state, stripping any individuality from your operations.
While operating agreements lay out the internal operating procedures for an LLC, bylaws are the governing documents for corporations. A corporation’s bylaws are also documented internally and, like an operating agreement, it outlines the way a company operates. For the most part, bylaws are important because they include the guiding principles for operating the corporation. This is why this document is typically drafted during the startup phase of the company.
Some information you might consider including in your company’s bylaws includes:
Also called a stockholders’ agreement, this internal document is responsible for outlining the way a business should be run, from the point of view of its shareholders. Its main purpose is to ensure that a company’s shareholders retain access to their rights and are considered and respected. It also prevents shareholders from being treated unfairly as the business grows. Like the other internal documents, shareholders’ agreements are typically drafted sometime during an organization’s beginning and are incredibly detailed. Shareholders’ agreements are not bylaws though, and this document is not legally required in any state. It’s still important though, and is most helpful for businesses with a small number of active shareholders.
Make sure to name your shareholders in the agreement and specify their responsibilities. This document should include the rights of shareholders, their voting weight, and problems that could arise between them. The shareholder’s agreement should also include any major decisions your company might face and the role shareholders will play in coming up with a solution.
Developing an amazing internal documentation system for your business doesn’t have to be difficult. It is, however, something that deserves lots of your time and attention, especially at the beginning. It can be difficult to know the exact documents that you need and the way to write them effectively though, and this is where legal assistance can come in handy. When you work with a lawyer experienced in internal documentation, you only increase your chances of success.
Contact Purple Fox Legal today to learn more about internal documentation and how you can customize your company’s internal documents to meet your needs.