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Protecting your business interests from legal claims

On Behalf of | Nov 22, 2023 | Business Formation And Planning |

Partnerships, small-business owners and corporations all have their own obligations and rights under Texas business laws, meaning they can all be held responsible under certain circumstances. Businesses have a lot at stake. Therefore, you should take steps to protect your interests and rights with enforceable agreements and preventive measures.

Selecting the right business entity

Business formation begins with choosing the right business entity. While sole proprietorships and partnerships require less paperwork to set up, a limited liability company (LLC) or a corporation can grant you tax flexibility and liability protection, but such structures carry more legal requirements. By choosing the best form of business entity, you can shield your personal assets from business disputes and liabilities.

Establishing the appropriate governing documents

After structuring your business according to your goals and objectives, you must ensure that you have documents that allow everyone involved to know their restrictions and responsibilities. The governing documents should clearly outline each partner’s, member’s or shareholder’s rights to protect you from potential disputes. Here are some examples of governing documents you may want to consider:

  • Corporate bylaws
  • Shareholders’ agreements or partnership agreements
  • Certificates of formation
  • Company policies and compliance plans
  • Operating or company agreements

The governing documents you need will depend on which form of business entity you choose. They should define ownership and company leadership, and clarify how you want the company to run. If properly drafted, your governing documents take precedence over Texas business laws should legal problems develop.

Creating transparent and enforceable agreements

One of the most important things to remember is to get everything in writing. You can shield your business interests by drafting clear and enforceable contracts for all business transactions, deals or agreements, even internal ones. Here are examples of contracts that could be helpful to your business:

  • Non-competition agreement or covenants
  • Employee agreements and handbooks
  • Non-disclosure agreements
  • Buy-sell agreements
  • Sales agreements
  • Commercial lease agreements
  • Contractor agreements

A business involves many different personalities and relationships that can cause problems at any given time. Whether you decide to establish a corporation or run the company independently, proactive prevention will be invaluable to prevent legal issues before they arise.