Careful business planning can prevent litigation

| Mar 9, 2021 | Business Litigation |

Legal troubles can cause even a well-established business in the Detroit area to struggle or even financially collapse.

While businesses may face litigation or regulatory actions from a government from time to time, a careful plan can prevent many lawsuits while ensuring that can easily survive the lawsuits it almost inevitably will have to deal with as it grows and thrives.

Businesses need to think beyond their formation

Choosing the right business structure is only the first step in the process of properly organizing a business’s affairs.

At a most basic level, the business will also want thorough governing documents. A corporation will require by-laws and articles of incorporation.

For almost every business type, stakeholders, including investors who are not going to play a management role, will also need to sign an agreement with each other.

This agreement is important because it will set out the ground rules for the investors’ relationship, including ground rules about buying and selling an interest in the business and what will happen if a dispute arises.

Without a clear agreement, expensive litigation may arise if one shareholder has different expectations than the other shareholders or, on the other hand, fails to do what the other shareholders expect.

Both initially and on an ongoing basis, businesses may also need to make critical filings with different government agencies.

Businesses will need a strategy for dealing with employees, third parties

Inevitably, businesses will also have to work with third parties, and this will involve negotiating and preparing lots of agreements:

  • They will need to have various agreements, including non-competition agreements, commission agreements, with their employees. They will also want to have clearly written employment policies in place; most employers will compile these into a handbook;
  • They will need to negotiate a real purchase or a commercial lease depending on whether a business chooses to own or rent a building;
  • They may need to negotiation loan documents or other agreements so that the business can acquire initial funding for its startup or for a special need during ongoing operations;
  • They may even need to prepare agreements about the business’s intellectual property and other trade secrets.

Again, if these agreements are not-existent or poorly thought out, it can turn what should have been a minor hiccup into a major legal problem.

An experienced attorney can help a Southeast Michigan business prepare the contracts and other documents it needs to succeed.