4th edition Legal Forms for Starting & Running a Small Business by Fred Steingold always up to date The law changes, but Nolo is always on top of it! We offer several ways to make sure you and your Nolo products are always up to date: Nolo’s Legal Updater We’ll send you an email whenever a new edition of your book is published! Sign up at www.nolo.com/legalupdater Updates @ Nolo.com Check www.nolo.com/updates to find recent changes in the law that affect the current edition of your book Nolo Customer Service To make sure that this edition of the book is the most recent one, call us at 800-728-3555 and ask one of our friendly customer service representatives Or find out at www.nolo.com NOLO please note We believe accurate and current legal information should help you solve many of your own legal problems on a cost-efficient basis But this text is not a substitute for personalized advice from a knowledgeable lawyer If you want the help of a trained professional, consult an attorney licensed to practice in your state NOLO 4th edition Legal Forms for Starting & Running a Small Business by Fred Steingold Fourth Edition FEBRUARY 2006 Editor CATHERINE CAPUTO Illustrations MARI STEIN Cover Design SUSAN PUTNEY Book Design TERRI HEARSH Production SARAH HINMAN Proofreading ROBERT WELLS CD-ROM Preparation ANDRÉ ZIVKOVICH & DOUG VARN Index BAYSIDE INDEXING SERVICES Printing CONSOLIDATED PRINTERS, INC Steingold, Fred Legal forms for starting & running a small business / by Fred S Steingold. 4th ed p cm ISBN 1-4133-0411-7 (alk paper) Small business Law and legislation United States Forms I Title: Legal forms for starting and running a small business II Title KF1659.A65S74 2006 346.73'06520269 dc22 2005055493 Copyright © 1995, 1996, 1998, 1999, 2001, 2004, and 2006 by Nolo All rights reserved Printed in the USA No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the publisher and the author Reproduction prohibitions not apply to the forms contained in this product when reproduced for personal use Quantity sales: For information on bulk purchases or corporate premium sales, please contact the Special Sales department For academic sales or textbook adoptions, ask for Academic Sales, 800-955-4775 Nolo, 950 Parker St., Berkeley, CA 94710 Acknowledgments Thanks to Jake Warner, Shannon Miehe, and Beth Laurence for their superb editing of the earlier editions of this book, and for the energy and enthusiasm they brought to this project And special thanks to Cathy Caputo for her excellent job in editing the current edition Thanks also to the other Nolo wizards who contributed their enormous skills to this and the accompanying software—especially: Tony Mancuso, Barbara Kate Repa, Robin Leonard, Lisa Goldoftas, and Ely Newman Finally, thanks to my colleague, Brook McCray Smith, for his many wise suggestions, and to my assistant, Jamie DeFlorio, for her help in preparing the manuscript About the Author Fred S Steingold practices law in Ann Arbor, Michigan He is the author of the bestselling Legal Guide for Starting & Running a Small Business and The Employer’s Legal Handbook His monthly column, The Legal Advisor, is carried by trade publications around the country Table of Contents I How to Use This Book A Four Practical Ways to Use the Forms in This Book I/3 B Do You Need a Lawyer? I/4 Contract Basics A Names Clause: Identifying the Parties to a Contract 1/2 B Signature Clause: Signing a Contract 1/4 C Standard Clauses 1/11 D Resolving Disputes 1/14 E Attachments 1/16 F Amendments 1/18 Forming Your Business A Form 2A: Checklist for Starting a Small Business 2/4 B Form 2B: Partnership Agreement 2/12 C Form 2C: Pre-Incorporation Agreement 2/18 D Form 2D: Corporate Bylaws 2/23 E Form 2E: Stock Agreement 2/27 F Form 2F: LLC Operating Agreement for Single-Member LLC 2/30 Running Your Corporation A Form 3A: Notice of Shareholders’ Meeting 3/3 B Form 3B: Notice of Directors’ Meeting 3/5 m o r e f r o m N O L o Law for All LLC Maker Windows CD-ROM Software $89.95/LLP1 Take your business beyond the usual with LLC Maker Whether you’re already in business or starting a new one, LLC Maker can help you take advantage of these benefits without paying hundreds or even Â�thousands of dollars in fees to lawyers and accountants LLC Maker puts all the legal and tax information you need right at your finger tips Use it to: • choose a valid LLC name in your state • generate and file Articles of Organization • prepare an Operating Agreement • qualify your LLC for partnership tax treatment LLC Maker streamlines and simplifies the time-consuming, paperwork-heavy process of creating forms It also helps you tailor every form and agreement to your state’s laws And if you’re ever stuck, the program’s comprehensive online help is available every step of the way Don’t miss the opportunity to business in a revolutionary new way—get LLC Maker today! 0 - 728-3555 or www.nolo.com m o r e f r o m N O L o Law for All Quicken Legal Business Pro 2006 Windows CD-ROM Software SBQB6 $109.99 When starting and running a business, most of the legal work involved simply requires proper forms and reliable information—and with Quicken Legal Business Pro, you’ll get everything you need to get the job done and save money on legal fees The software provides over 140 legal, business, tax and marketing documents—many of which you can complete onscreen with a simple step-by-step interview! 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Legal Guide for Starting & Running a Small Business by Attorney Fred S Steingold Small business owners are regularly confronted by a bewildering array of legal questions and problems Ignoring them can lead to disaster—but Legal Guide for Starting & Running a Small Business provides the practical and legal information you need! $34.99/RUNS The Small Business Start-Up Kit A Step-by-Step Legal Guide by Peri H Pakroo, J.D Book With CD-ROM Launch your new business quickly and efficiently with this book User-friendly and loaded with tips, The Small Business Start-Up Kit will guide you through the process step by step Includes all the forms you need both as tear-outs and on CD-ROM $24.99/SMBU LLC or Corporation? How to Choose the Right Form for Your Business by Attorney Anthony Mancuso Choosing to incorporate is one thing—choosing between a limited liability company, S Corporation or C Corporation is another, because the form you choose will be the most important business decision you make Get the information you need with this quick read! $24.99/CHENT 0 - 728-3555 or www.nolo.com m o r e f r o m N O L o Tax Savvy for Small Business by Attorney Frederick W Daily Nearly every decision a business makes has tax consequences that affect its bottom line, and the IRS is always watching Fortunately, it’s g1ss mak24 has 24 218.3 6981 businy Fs 1407m linet 0 - 728-3555 or www.nolo.com m o r e f r o m N O L o Law for All These Business Books Are Tax Deductible! Tax Deductions for Professionals by Attorney Stephen Fishman What architects, lawyers, dentists, chiropractors, doctors and other licensed professionals have in common? Answer: special tax considerations If you’re ready to hold on to more of your hard-earned money, turn to Tax Deductions for Professionals $34.99/DEPO Every Landlord’s Tax Deduction Guide by Attorney Stephen Fishman One of the chief benefits of owning rental property is the numerous tax write-offs available It’s also one of the most complex and confusing areas of tax law Let this book guide you through the maze: Fill out the IRS Schedule E, determine if an expense is deductible or depreciable, keep proper records and more! $34.99/DELL What Every Inventor Needs to Know About Business & Taxes by Attorney Stephen Fishman Perhaps you’ve created the perfect widget—but if you want to make a profit from it, you have to protect and enforce invention rights, choose the proper structure for your business, deduct invention expenses, and transfer invention rights $21.99/ILAX 0 - 728-3555 or www.nolo.com m o r e f r o m N O L o Law for All Form Your Own Limited Liability Company by Attorney Anthony Mancuso Book With CD-ROM The LLC has become the business entity of choice for smaller, privately-held companies Form Your Own Limited Liability Company provides the step-by-step instructions and forms you need (as tear-outs and on CD-ROM) to form one in your state, without the expense of hiring a lawyer $44.99/LIAB Incorporate Your Business A Legal Guide to Forming a Corporation in Your State by Attorney Anthony Mancuso Book With CD-ROM This easy-to-use guide takes you step by step through the process of forming a corporation in your state When you’re finished, your company will enjoy unique tax benefits, limited liability, immediate organization—and much more Includes all the forms you need as tear-outs and on CD-ROM $49.99/NIBS Your Limited Liability Company An Operating Manual by Attorney Anthony Mancuso Book With CD-ROM Your Limited Liability Company gives you everything you need to maintain the legal validity of your LLC before the courts and the IRS It provides checklists, minutes, written consents and more than 50 resolutions as tear-outs and on CD-ROM $49.99/LOP The Corporate Records Handbook Meetings, Minutes & Resolutions Book With CD-ROM Everything you need to maintain the legal validity of your corporation is included in this book You’ll find out how to call meetings, keep records and organize minutes—all of which creates a solid paper trail that will satisfy the IRS Provides over 110 forms as tear-outs and on CD-ROM $69.99/CORMI 0 - 728-3555 or www.nolo.com CATA L O G more from Nolo PRICE CODE BUSINESS Becoming a Mediator: Your Guide to Career Opportunities $29.99 BECM Business Buyout Agreements (Book w/CD-ROM) $49.99 BSAG The CA Nonprofit Corporation Kit (Binder w/CD-ROM) $69.99 CNP California Workers’ Comp: How to Take Charge When You’re Injured on the Job $34.99 WORK The Complete Guide to Buying a Business $24.99 BUYBU The Complete Guide to Selling Your Business $24.99 SELBU Consultant & Independent Contractor Agreements (Book w/CD-ROM) $29.99 CICA The Corporate Records Handbook (Book w/CD-ROM) $69.99 CORMI Create Your Own Employee Handbook (Book w/CD-ROM) $49.99 EMHA Dealing With Problem Employees $44.99 PROBM Deduct It! 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Fred Legal forms for starting & running a small business / by Fred S Steingold. 4th ed p cm ISBN 1-4133-0411-7 (alk paper) Small business Law and legislation United States Forms I Title: Legal forms. .. 1/8 LEGAL FORMS FOR STARTING & RUNNING A SMALL BUSINESS Personal Guarantee of a Lease—Single Guarantor In consideration of [name of landlord] signing the above contract, I personally guarantee... property states: Arizona Louisiana Texas California New Mexico Washington Idaho Nevada Wisconsin (Also, in Alaska, a couple can sign a written document agreeing that all property will be treated as community