Shareholder/Partnership/Operating Agreements – When owning a business with one or more other parties, the owners must carefully consider and put in writing how they want to handle decision making, financial contributions and distributions, and transfer of ownership. If the owners have not agreed on these matters, the rules promulgated under state law are applied, often with unintended results.
Some questions for consideration in business ownership relationships:
- How will decisions be made? Decision-making is often made by majority vote but certain decisions should require unanimous approval and should be discussed and agreed among owners.
- What happens if an owner elects to no longer participate in the business? If no agreement is in place, the company may end up with an owner who gets to share in profits and losses but is not obligated to perform any duties.
- What if an owner dies? If no agreement exists, the ownership interest will go to the decedent’s estate and the remaining owners will have no clear right to regain ownership of that interest.
These are only a few of the issues that are critical to discuss and document.
Our goal as Corporate Counsel in creating these documents is to ensure that our clients’ intentions are laid out as clearly as possible at the outset before any problems arise.