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Do You Need a Shareholders’ Agreement??

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Consider a shareholder for any type of business?

If you are considering going into any type of business with others and are looking for some protection and peace of mind about your future relationships and protecting your assets with them, you should consider a shareholders’ agreement.

What is it?

A shareholders’ agreement is a document of agreement between the shareholders of a company. The purpose of a shareholders’ agreement is to protect the shareholders’ investment in the company, to establish a fair relationship between the shareholders, and to govern how the company is run.

Do I need it?

If you are the company’s only shareholder, you do not need a shareholders’ agreement. If you plan to grow your business beyond just one person, you really should consider having one. Shareholders’ agreements exist to establish and describe the respective rights of two or more stockholders.

Some common scenarios where you should expect to have shareholder agreements in place would be:

  • You and a partner are starting the company together and you both are contributing valuable talent or assets to the company.
  • No single shareholder owns a majority of the company’s stock.
  • A partner/shareholder has contributed cash or assets to the company and wants to protect his/her return on investment (ROI).
  • A partner/shareholder plays a critical role in the company’s management for success.

You should consider a shareholders’ agreement to:

  • Define how important decisions are made.
  • Provide some protection for minority shareholders and the company.
  • Describe how the company is going to be run.
  • Regulate the sale of share in the company.
  • Set out the shareholders’ rights and obligations.

How can I get one?

Shareholders’ agreements are serious legal documents that should be treated as such. It will be considered worth your time consulting a professional rather than trying to put one together yourself. We can guide your company in the right direction.

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*The information presented in this article does not constitute legal advice and is not intended to create an attorney-client relationship.  The information presented in this article is not tax advice.

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