From limited liability companies (LLC) and partnerships to corporations, all businesses need corporate governance to provide a framework for the ownership and operation of the business.
Corporate governance is essential to establish rules governing how a business will be managed, and to institute the rights and obligations of the owners of the business. Corporate governance is a set of rules, regulations, practices and processes by which a business is both directed and controlled.
Typical corporate governance documents for either a limited partnership or a partnership include a formation certificate and partnership agreement. For a LLC, articles of organization are filed with the State and the parties usually enter into an operating agreement. For a corporation, corporate governance documents include bylaws, articles of incorporation and often times, shareholder agreements. While some business owners feel as though these documents are just formalities, they are actually very important to running a business because they can alleviate many future problems.
Corporate governance is extremely important for businesses, mainly because it demonstrates transparency and accountability. Additionally, corporate governance eliminates confusion and can resolve disputes because it provides both a framework and guidelines for how a business should be run and what duties employees, owners and managers have to one another and to the business. Creating corporate governance documents does not have to be expensive, however, it is often times more valuable for a company to spend more time and money creating these documents specific to the owners needs and wants, as opposed to using standard forms which may have unintended consequences or fail to address certain issues. Your corporate governance documents should be reviewed every couple of years to make sure they match the operational and organizational goals of the business and its owners.
Contact one of our Corporate Planning attorneys at CCJ for guidance in creating your business plan.