As the economy picks up steam and more businesses are formed and look to expand, all business people must seriously review their company agreements and shareholder agreements. The governing documents have become essential for every business, regardless of size. Company agreements, such as shareholder, Limited Liability Company agreements, and Limited Partnership agreements are essential to defining the rights and responsibilities of each equity member/partner to the business and to each other.
Business partners assume everyone will dedicate their full time and energy to the venture, when that is not the common understanding, even amongst the partners. For example, will a business permit a shareholder or member to also be engaged in different (albeit unrelated) business ventures, or will it require full-time effort by every officer or director?
Even when a business is up and running, the equity owners must decide if any one of them may sell his or her equity interests to a third party, maybe willed to his or her heirs, and decide what happens to that interest if a partner in the business is involved in a particularly nasty divorce or has a judgment against him or her.
It’s an old but true adage that if you failed to plan; you planned to fail.