“Business sustainability” often refers to the management of an organization’s triple bottom line – that is, looking beyond the traditional financial profit measures to include the organization’s social and environmental contributions as well. But let’s face it, before an organization can focus on its environmental and social impacts, it must build the legal and financial framework for a lasting and sustainable business. Below are five best practices for building the legal framework for a business that is capable of being sustained over time, and eventually expanding its focus to those loftier environmental and social sustainability goals.

1. Business Structure. Setting up the right business structure is essential to establishing the foundation for a sustainable business. The most common forms for business entities include sole proprietorships, limited liability companies, corporations, or partnerships, and each has its own benefits and drawbacks that should be explored. In most situations, limiting personal liability of the business owners is a primary concern. This can only be achieved through registration of the proper entity and observance of all corporate formalities, including establishing a separate bank account, preparing and executing corporate governance documents such as an operating agreement, corporate bylaws and corporate resolutions reflecting important organizational decisions, like the election of directors, managers and officers. If there is more than one business owner, the corporate governance documents should include, at a minimum, buy-sell provisions and death buyout provisions, to avoid future
ownership disputes.

2. Intellectual Property (IP) Protection. Every business has some sort of IP, whether it is the business’s brand names, inventions, trade secrets or original creations. Protecting that IP often provides a necessary competitive advantage over others in the marketplace and is therefore of utmost importance. There are a variety of strategies available to protect IP depending on the type of IP, such as registration and contractual protections relating to the IP.

3. Customer Contracts. Keeping customers happy should be a primary goal of the business, and the best way to do that is to set expectations up front with customers in a written contract, which can take the form of terms and conditions, terms of service, terms of use, or the like. Customer contracts will vary from industry to industry but there are common key terms that should be included or considered in every customer contract, for example, pricing, scope of services or products, warranties and corresponding disclaimers of warranties, limitations of liability, and dispute resolution provisions. It is also important to consider how the customer will sign or accept the terms to form a legally binding contract. Will the contract be printed with a physical signature? Will the customer be expected to check a box online? Will the terms be incorporated by a hyperlink into a purchase order?

4. Vendor Contracts. In order to keep those promises made in customer contracts, the organization must effectively manage its vendors and supply chain. Again, the best way to do this is through written contracts specifying each party’s rights and obligations. Contractual obligations with customers should be flowed down to vendors to ensure compliance.

5. Worker Documentation. If the organization has individual employees or contractors, it must comply with federal and state employment laws. Although written contracts are not required per se, implementing written documentation will help to avoid disputes, and can address issues like employment status, taxes, overtime, scope of work, scope of authority, confidentiality, non-compete, and intellectual property ownership. Without documentation, such as an employment agreement, independent contractor agreement, and employment policies and procedures, the organization faces substantial risks of noncompliance with employment and tax laws, and employment disputes.

Setting up the legal framework to support sustainable business establishment and growth can be time-consuming but it is well worth the effort.

LowndesAlex Simser is a corporate and intellectual property attorney with the Lowndes law firm. Alex has significant experience representing clients involved in complex business transactions, including mergers and acquisitions, recapitalizations, reorganizations, investments, and joint ventures. She regularly acts as legal counsel to companies and business owners in a variety of industries regarding their ongoing legal needs. If you have any questions, contact Alex Simser at Alexandrea.Simser@lowndes-law.com