Congratulations, you filed your paperwork with the North Carolina Secretary of State and you’ve officially created a business! Now what? We work with many new business owners in North Carolina, and we’re sharing a key group of documents you need when starting a business in NC, including a breakdown by corporate structure.
One of the most common problems we run into with business owners is that they’ve started their business, but they’ve not taken the next step in creating the necessary documents that control the management of their businesses. An LLC should have an operating agreement and a corporation should have bylaws to control the management of the business.
Without these documents, an owner, manager, or anyone else in control of the business could potentially run into serious problems. The most common problems we see include:
- How to split profits and losses,
- Who has decision making authority, and
- How do I kick someone out of my business?
Operating agreements and bylaws set out all of these terms at the creation of the business and help eliminate any potential problems down the road.
These agreements also help plan for the future of your business. The goal is for your business to grow – hopefully your business in year one is much different than your business in year five.
Having an agreement that defines things such as distribution of profits and losses, how the business is managed (i.e. is one person in charge or two?), how decisions are made, what happens if there’s a disagreement over a decision, how to add new members to the business, and what happen if the business is dissolved, is important.
This is all to say that these agreements are proactive in protecting your business, rather than reactive to a problem you may face. We strongly encourage anyone starting a business to get an agreement in place. Operating agreements and bylaws are not filed with the Secretary of State and can be amended. So as your business grows and changes, your operating agreement or bylaws can also change to fit the needs of your business.
If your LLC or Corporation does not currently have an operating agreement or bylaws, you should contact your business attorney to establish those documents.