Avoiding the Pitfalls of One Size Fits All Legal Documents

Kasey D. Bolton, Esq., kbolton@tuckerlaw.com, (717) 221-7973

In corporate formation, an ounce of prevention is worth a pound of cure. In the early stages of a business, every dollar counts. The temptation to go to a website and download a one size fits all $50 operating agreement and call it a day can feel efficient and prudent. However, the reality is that corporate documents aren’t just paperwork; they are the “instruction manual” for your business when circumstances change or things go wrong. When that instruction manual is not suited for your needs or applicable to your situation, the resulting litigation costs significantly dwarf any initial “savings.”

In just the past few months, I have litigated cases based on DIY or downloaded documents that have cost clients significant sums of money because the documents did not provide the exit strategy necessary for their businesses. These digitally downloadable documents are designed for the masses and contain the bare minimum legal requirements. They are not tailored to your specific business, industry, or situation. These documents never contain concrete “what-if” clauses that govern some of the major issues facing small business, such as a “deadlock” clause dictating what happens if two 50/50 partners can’t agree, a dissolution or buyout clause for when the parties cannot continue to operate together, and most importantly, a valuation clause for how to value the business and assets in the event of a breakup. 

It typically costs between $2,000 and $5,000 to draft corporate documents suited to a particular business. The litigation costs associated with judicial interpretation of a one-size-fits-all document can be well over 10x that much and take years to resolve. Many business owners realize too late that their generic documents do not provide them with the protections and road maps that a tailored document does. When building a business, think of an attorney as an engineer. You wouldn’t build a skyscraper on a foundation you “downloaded” for $50. Investing in professionally drafted corporate documents is a proactive move that pays dividends in clarity, protection, and peace of mind. For more information on custom corporate documents, reach out to Kasey Bolton at kbolton@tuckerlaw.com or (717) 221-7973.