Introduction
Legal Documents/Agreements for day to day Management of New Business Venture
One of the documents that would be needed for the day-to-day management is the article of incorporation. It enbles the ownwers to be successful in starting the business. A key mistake that start-up owners make is the failure to provide an appropriate structure. It can be understood by the fact that if the company’s ownwers do not identify an appropriate legal structure, it can lead to high level taxes and legal liabilities. Hence, the companies should fill with the Internal Revenue Service to develop a specific legal entity for the start-up to avoid the risk of losing personal assets. Due to various shareholders, C Corporation will be formed. Business Corporation needs the legal agreements like organizational meetings and bylaws to manage day- to-day operations efficiently (Faustman, 2016).
The U.S. law obliged the companie/business corporations to document what was done/or talked about at the meetings. The main reason to maintain minutes is that it can help to settle a dispute. The document includes factors like type of meeting, time and place of meeting, attendance, all activities and votes, etc. Moreover, to provide assurance that the start-up operations will have little issues as possible the owners should develop effective bylaws. The bylaws include the internal rules of the company, such as methods to handle disputes, selection of leadership, methods to determine the rights and power of key shareholders. Furthermore, bylaws are comprised of voting thresholds for approvals like selection of new board member (Akalp, 2014).
The ownwers of the Limited Liability Company (LLC) should have Operating agreements. It includes the relationship status of owners and communication and conflict-resolution clauses. However, Business Corporation does not need operating agreement. Share certificate for each shareholder will be developed to indicate the ownership. In addition, other document includes IRS Form SS4 (USA Corporate Services Inc., 2013). Employment contracts and offer letters are part of the legal documents for the day-to-day management of operations. The employment contracts include the specifications like terms of employment (e.g. compensation, roles and responsibilities, working hours and rules of termination). In addition, the contracts include the structure of reporting, expectations, share vesting, and the policies of the company (e.g. vacation leave, dress code, and other leaves). Business plan is not a legal agreement/document, but it helps to get finances and to reach the ultimate goals. These are the key legal documents that would be needed to manage day-to-day operations of the new business corporation in the U.S. In case of any issue during the business operations, these documents will provide evidences and a medium to solve the issues effectively (Faustman, 2016).
Importance of Exit Strategy in Business Plan
The companies should develop an effective exit strategy in the business plan because it enables the owners to define the success of the business. An effective exit strategy helps the business owners to get back the initiail investment and to create a win-win situation (Tassiopoulos, 2008).
Elements of Exit Strategy Offer
The effective strategy offer has various elements to be successful. The elements include in the exit strategy are understanding of objectives of the owner, assessment of environment, gap analysis and development and implementation of plan. The strategy will include the objectives of exit like increase in profits. In addition, the exit strategy will include the assessment of opportunities and issues of the business from the perspective of the purchaser. For instance, the exit strategy offer will provide a notion about the financial reports of the corporation to identify that the business has potential of becoming a prosper one. The positive cash flows, income statement and balance sheets of the business during the period of operations will be included to increase the value of the offer. A number of potential assets and lack of debts will indicate the positive picture of the offer as the purchaser can use the assets to earn revenue. In addition, positive cash flows identify the liquidity position of the business as cash is the lifeline of the business. Moreover, all legal agreements will be included in the exit strategy offer to provide the evidence of each activity of the business. Accordingly, the deal structure will be identified in relation to the analysis of opportunities and issues. The strategy that will be chosen to exit is merger. A merger strategy is chosen because the aim of the exit is to enhance the profits and ability to operate at broader scale. Furthermore, the desired selling price will be indicated by gap analysis. The selling price will be in accordance with the position of the business, market attractiveness of the business, and buyer’s ability to pay. Last but not the least; plan is the part of the exit strategy offer to bring key changes and assessment of alternatives. The earlier described elements will be used to develop an exit strategy offer to buyer.
The exit strategy of the business will be the merger with a prestigious Italian resort for the win-win situation. The main reason of choosing this strategy in business plan is to acquire complementary skills and to save resources. The strategy is selected by taking into consideration the sound financial position of the business and need to extend the operations in the market by targeting the Italian cuisine. It is an efficient way to increase the revenue and target the market.
Conclusion
It can be concluded from the above discussion that legal agreements are important to avoid any risk. In addition, the legal agreements help to exit effectively and efficiently. Effective exit strategy helps the businesses to gain maximum gain from the selling of businesses by creating win-win situation for both buyers and sellers. Hence, the businesses should develop an exit strategy by defining clear objectives, assessment of opportunities and issues from the perspectives of both buyers and sellers and gap analysis. It is due to the fact that from buyer perspective, there will be an opportunity for him/her to purchase the business. In addition, from the seller perspective there should be a sound position of business to gain the expected benefits from the deal. Healthy financial position and legal agreements provide a feasible opportunity for both buyer and seller to create a win-win situation. It means buyer can exploit the opportunity and seller can earn profits. Merger is an effective strategy to increase revenue at fast pace and to extend the operations by combing the resources.
References
Akalp, N. (2014). The 10 Key Legal Documents for Your Business. Retrieved from: https://www.entrepreneur.com/article/236967
Dransfield, R. (2004). Business for foundation degrees and higher awards. USA: Heinemann.
Faustman, M. (2016).The Top 7 Legal Documents for Every Startup. Retrieved from: https://www.entrepreneur.com/article/253997
Tassiopoulos, D. (2008). New tourism ventures: an entrepreneurial and managerial approach. USA: Juta Pty Ltd Academic Publishers.
USA Corporate Services Inc. (2013). Summary of New Company Document Requirements. Retrieved from: https://www.usa-corporate.com/setting-up-a-us-company-as-a-non-us-resident/what-documents-are-needed-to-set-up-a-us-company/
Weber, J. (2013). From Idea to Exit: The Entrepreneurial Journey. USA: Skyhorse Publishing, Inc.
