Business owners and operators are often so preoccupied with the day-to-day operations of the enterprise that they overlook legal and practical details that may be of immediate or long-term importance. As a “reminder,” here’s a Checklist for business owners and operators (view digital version here), highlighting issues common to nearly all businesses. Consult with your attorneys and other professional advisors to ensure your business is appropriately covered.
General Corporate / Corporate Housekeeping:
- Registration to conduct business in various states or municipalities (e.g. Chicago)
- Minute Book update. Have you documented all board minutes/meetings/written consents?
- Board Schedule and Board Goals for coming year. Be organized and have goals for both the company and the board for the coming year.
- Any review/updating of standard contracts. (e.g. licenses, SaaS, services agreements, etc.)
- Officer/Director Indemnification Agreement for any new officers and directors.
- Hold annual stockholders meeting, if applicable.
- Make sure your contracts are all set up for an M&A deal and organized in a central electronic storage system. Be aware of those that require consent in a merger, sale or transaction.
- Review Charter, by-laws, cap table and shareholder agreements to ensure they are up to date.
- If any company activities, investors or counterparties are foreign, consider additional review by a U.S. and foreign advisor.
- Have all employees/consultants/etc executed NDAs, IP assignment, non-solicitation, non-compete agreements? Has anyone excluded IP from their terms of engagement?
- Conduct an IP inventory to determine if you should protect anything.
- Trademark/Service Mark – Verify who holds rights to these and transfer to company.
- Trade Secrets
- If you have a trademark/service mark are you using TM or ®? Should a D/B/A be filed?
- Inventory and confirm ownership of all URLs.
Employment Matters & Incentive Compensation:
- Confirm all employee documents are complete and in a secure file.
- Updated Employee Handbook.
- Updated Non-Disclosure/Non-Compete/Non-Solicitation/IP Assignment/Employment/Consulting Agreements and/or offer letter for at-will employees and contractors/advisors. Ensure customized for each state in which you have employees or contractors/advisors and update to reflect recent changes to applicable laws.
- Current posters posted for State, Federal and Local laws (including Chicago PTO compliance).
- Update and review Benefits Plans.
- Update and review Stock Incentive Plan/Appreciation Rights Plans.
- Verify compliance with Section 409A. Verify all options are dated and documented correctly. Make sure 409A valuation is updated and current.
- Have all option grants been memorialized in written minutes of the board or compensation committee? Written documentation is critical.
- Any employees located out of state? If so, need to verify no special requirements in each state and look at insurance and workman’s compensation requirements (e.g. New York).
- Have you looked at independent contractor vs. employee categorization?
- Review workforce composition/payroll for minimum wage and employee classification compliance.
- Have founder vesting agreements been executed? If desired, have all founders filed 83(b) elections, if desired.
- Adoption of FCPA, anti-harassment and discrimination policies.
- Perform annual employee anti-harassment and related training.
- Be aware of remote employees and the employment law and tax issues associated with a remote workforce.
- Think about COVID and other related policies.
Cyber PII & Regulatory:
- Review PII, credit card information, cyber issues, cyber breach, biometric e-mail/text and other electronic protections.
- If you have sold securities, be sure you have complied with applicable Federal and State laws (including Form D and blue sky notice filings, as necessary).
- Any other regulatory issues? (FTC, SEC, FDA, FINRA, etc.)
- Review contracts to assess cyber breach liability, indemnification and related risks.
Taxes / Licenses:
- Payment of corporate filing fees and franchise taxes.
- Sales & Use taxes
- City of Chicago Head Tax and Cloud Tax
- Other Taxes
- City and Other Local Licenses – City of Chicago license.
- Qualified to do business in relevant states.
- If you are doing any business internationally, even via the Internet, analyze VAT and other taxes.
- Please discuss all of these with your accountant/tax preparer.
- Review activities in relation to QSBS/1202 stock, if applicable.
Accounting Processes & Controls:
- Audited financials or not? Review compliance with GAAP
- Documentation and controls
- Segmentation of work processes
- Checks and balances
- Disaster plan and recovery plans
- D&O – Discuss this with counsel at least 2-3 months before renewal. D&O coverage is very negotiable, but you cannot do it at the last minute.
- General Liability
- Cyber Liability
- Any potential insurance claims you should have reported? Typically you need to report within 60 days of learning about a potential claim. Make sure to discuss these with counsel before your broker to ensure that you can preserve attorney-client privilege.
- Have you looked at other brokers to make sure you are getting the best possible service and products?
- Update policies to reflect recent changes to corporate structure, acquisitions, changes in directors/officers, etc.
Estate Planning / Wealth Management:
- Have you thought about transferring equity at a low-cost basis for future generations/estate planning?
- Other succession planning.
For more information about how Neal Gerber Eisenberg can serve your business needs, contact Michael Gray at 312.269.8086 or firstname.lastname@example.org.
Note: This Checklist should not be construed as legal advice or a legal opinion on any particular fact or circumstance. It is intended for general purposes only and you are encouraged to consult a lawyer concerning your own situation and any specific legal questions you may have with respect to the potential issues set forth herein.