Corporate Governance and Management

A new business is a lot like a new relationship. The excitement is palpable; the partners are inspired, and the future couldn’t feel any brighter. But what happens after the “honeymoon phase”?

Because great companies often stay in business for years or even decades, solid corporate governance is an absolute necessity. A good company agreement will set the ground rules for your long-term business relationship. It allows you to set your goals and responsibilities, understand how profits and losses are shared or allocated, and decide how members can join or leave the company. Establishing these rules from the beginning is the best way to streamline decision-making and avoid the kind of internal conflict that can ruin a great business.

Who’s in Charge?

Every partner in a company has a role to play. In most cases, the partners take on multiple roles related to operations, marketing, sales, accounting, and human resources management. When there are several partners fulfilling various roles, it is important that your company agreement sets out these roles clearly. You have to know who’s in charge in order to delegate efficiently and gauge performance effectively.

How are new members introduced into the company?

As a company grows, so do the people involved in its day-to-day operations. Moreover, a successful company will generally want to bring on additional capital to support its next phase of growth—and this, too, means bringing on new partners. But how do you decide who to bring on? Who should be involved in the approval process? And how much money should  it cost that new partner to join your team? TLC can help you to determine the most effective and legally compliant methods for bringing new partners into your unique venture.

How are profits and losses allocated?

Often, when a company is first getting off the ground, the partners share and share alike—in the boon times and in the lean times. However, in many cases, it’s just not practical to have everyone be an equal partner in the business. For example, partners who bring capital to the table often have a different stake than those who bring their talents and expertise—often referred to as their “sweat equity”. TLC can help your company determine a profit and loss structure that incentivizes loyalty, engagement, and growth, while keeping things fair and equitable among the partners.

What Happens when it’s time to wind up?

While a very rare handful of companies outlive their founding partners, the vast majority will either dissolve, transform into a new venture, or get bought out by a bigger fish. This is rarely bad news for the company; in fact, it’s generally something to embrace! But if you want to ensure that there are no trailing liabilities associated with your company, there are several legal strategies that can help you protect yourself and your partners. TLC can prepare you for any of these changes, and advise you effectively if you decide that it’s time to part ways.