The time to repair the roof is when the sun is shining.” ― John F. Kennedy
In the Protection phase, you plan for your business to be more successful than you ever dreamed. In this phase, you should be making efforts to protect your future millions (or billions) of dollars and market share from any person or event which may threaten it. This phase often requires the drafting of customized legal instruments which, to be effective, must be binding and comply with local, state, and federal law. Some of such instruments which may be required are:
- Buy/Sell Agreement
- Indemnification Agreement
- Operating Agreement
- Non-Disclosure Agreement
- Employee Stock Ownership Plan
Similar to a prenuptial agreement, many of these documents are laying the foundation for a negative event and choreographing how the business will move forward should such an event take place. It is no doubt unfortunate to think about partnerships dissolving, stakeholders dying, customers suing, vendors stealing, or the sky falling. But, the prudent business owner must make preparations before these things happen. After all, when did Noah build the arc... before the rain. So in this phase you will insulate the business from unfortunate events, build safeguards to protect the assets of the business and its stakeholders, and gather advisors and professionals to assist in navigating troubled waters, should they ever come.
Proper completion of the Protection phase should include answers to questions such as:
- What happens if a partner dies?
- Can a shareholder sell their shares to anyone without consulting the other owners?
- Who should have access to confidential information?
- What insurance policies are available and what policies are necessary?
- Are your personal assets at risk if your business is sued?
Beware of allowing the protection phase to scare you out of doing business. After all:
- No one can limit their liability to zero.
- Anyone can sue anyone else, it does not mean they will win.
- You first have to build something, before you can lose it.
At Lawrence Law Firm we assist small businesses and their owners in navigating the cycle of small business, thinking ahead to the subsequent phases, and executing them. Our founder, Aaron Lawrence has assisted businesses nationwide as a consultant, attorney, and advisor. Whether you are in a pre-startup phase and looking to incorporate, are scaling into new markets, or have hit a new point in your business and would like guidance on how to proceed, schedule an appointment with us to see how we can assist.