Beyond The Shell – Avoiding Potential Business Liability And Litigation

The U.S. Small Business Administration has posted on its website that there are over 23 million small businesses in the United States, and that they have provided nearly 55% of all jobs (inclusive of over 65% of all net new jobs since the 1970s). Further, the SBA has represented that “the number of small businesses in the United States has increased 49% since 1982” and “since 1990, as big business eliminated 4 million jobs, small businesses added 8 million new jobs.”  Partnerships and closely held businesses (corporations and LLCs) make up a large portion of these emerging small businesses.

Small businesses are minimally governed under bare bones mandatory filings and statutory provisions, but many owners don’t realize that there are also legal obligations involving fiduciary duties among each of the owners. Beyond merely creating a technical shell to begin a business, the drafting of by-laws, shareholder agreements or operating agreements are strongly recommended to provide the mechanism to protect owners.  Unfortunately, too many small businesses fail to properly develop and maintain these supporting written tools, and fail to govern their daily and annual businesses operations in the formal manners which can ensure that everyone is participating in the business on the same page, and with the best interests of the others involved.

The good news is that it is never too late to put these protections in place.  For years this office has been performing legal services for hundreds of small businesses. We have also represented numerous businesses and their principals in undesirable litigation that has resulted from a lack of informed corporate governance.  Through our representation, we have developed an understanding of where many of the potential problems might occur, and have developed the knowledge of how to proactively assist owners and businesses in their operations, in order to help avoid many of these costly pitfalls.