Shareholder Agreements

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If you have a business partner, the most important document you have will be called a shareholder agreement or operating agreement (for LLC’s).

The Shareholder agreement is a contract that you have that governs the relationship you have with your business partner(s). This is an absolute “MUST HAVE” for anyone who decides to go into business with a partner. Approximately 0% of businesses go exactly the way the founders planned it. If you are a sole owner, you can make adjustments easily. Once you have a business partner, you’ll need to agree on changes to the business plan. Disagreements occur when you have too much money or not enough money. Suddenly, the friendship that created the partnership is less important than the money at stake.

The shareholder agreement should be drafted before the problems arise. The best time to negotiate the agreement is when the business partners are getting along. Once things begin to fall apart, it is much more difficult to negotiate.

Some example provisions in a shareholder agreement include a buy/sell agreement, division of duties, use and ownership of intellectual property, exit strategies, and many many more.

If you have a business partner and no written agreement with him or her, get that done as soon as possible. It will save you arguments, money, and potentially, your business. It is one item that is definitely worth the money you spend on it. While some law firms will draft the agreement for both of you, it is a good idea for each partner to have his own attorney during the negotiation of the agreement.

Brian Fons, Corporate Creations. Brian.Fons@corpcreations.com or check out my Podcast in iTunes.

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