Unless you are a sole proprietor, you have others involved in assisting with the operation of your business. Whether you run a small family-owned company or a vast corporate enterprise, your future hinges on whether you have a comprehensive plan in place regarding how the business will be managed, who handles day-to-day operations, what happens if one of your partners or co-owners dies or becomes disabled, and what happens if one of the partners or co-owners decides to retire. Always fodder for expensive, time consuming, and emotional disputes, what happens if the partners or co-owners can no longer get along and cannot agree as to how the business will be handled?
At Cohen Law Firm, I can help you identify risks, determine goals and objectives, and create comprehensive agreements that ensure your company prospers and grows, and will continue to prosper and grow after the occurrence of an unexpected event.
Shareholder Agreements
If you own a family-run or small business, a shareholder agreement can mean the difference between survival and bankruptcy. Without one, the future of your company is subject to life’s curveballs and unexpected events. Shareholder agreements define the details of the relationships between the shareholders of a corporation. Normally, they restrict the ability of a shareholder to transfer his or her shares to someone else, so that the corporation remains owned by the small circle of people who originally started the business. In addition, shareholder agreements define what happens to the shares of an owner who passes away or becomes incapacitated and is no longer able to provide services to the company.
The agreement can also provide a mechanism for one shareholder to buy out the others if they can no longer get along or if a shareholder wants to retire. If there is a concern that there will not be sufficient funds to purchase the shares of a shareholder upon the occurrence of an unexpected event, the shareholder agreement can provide for the purchase of life and disability insurance to provide those funds upon the happening of the event. Planning for these events in advance with a well-drafted shareholder agreement avoids uncertainty and disputes later and can mean the difference between a profitable continuation of the business, or a forced dissolution and financial disaster.
Operating Agreements
An operating agreement is similar to a shareholder agreement, but it is tailored for a limited liability company and also includes matters that are normally included in a corporation’s bylaws. Instead of shareholders, the company has members. The operating agreement appoints the manager, defines what happens in the event of an unexpected occurrence, such as the death or disability of a member, and sets forth a mechanism for one member to buy out another under various circumstances. Like a shareholder agreement, the arrangements that can be established by an operating agreement are of infinite variety.
At the Cohen Law Firm, I will work with you to determine your goals, objectives, and desires, explain to you all the possible arrangements for your particular circumstances and wishes, and an operating agreement to do what you want. Going through this process will prevent you from jumping into the daily operations of running your company without pausing to consider the inevitable “what-ifs” that can arise down the road.
With decades of experience, I know what kinds of issues are frequently faced by limited liability companies. When we address your company’s needs, we will discuss your goals, objectives, and desires, including how you want the company managed, what restrictions should be placed on the transfer of membership interests, how profits and losses should be distributed, member rights and responsibilities, methods of dispute resolution, and mechanisms for disposition of a deceased or disabled member’s interests. At the end of the day, your company’s operating agreement should take the guesswork out of running your business. With a proper plan in place, you can stop worrying about contingencies and get back to doing what you love.
Partnership Agreements
Like shareholder and operating agreements, partnership agreements address both the daily functions of the organization and its procedures for handling disputes and other contingencies. They also define whether you are operating a general partnership where all partners have equal rights and liabilities, or a limited partnership where only the general partners have liability and the limited partners are merely investors with no say in how the company is run. Although you do not need a written partnership agreement to operate as a general partnership, you risk disaster if you fail to put an agreement on paper. Countless partnerships end in expensive dissolution and dispute litigation between disgruntled partners who have not taken the time to define in advance the details of their relationship.
Cohen Law Firm Serving California Business Owners
Whether you own a local shop or a growing company, you have unique needs. Unlike big firms with dozens of junior associates and unwieldy overhead, I offer sophisticated counsel and cost-effective solutions. To discuss how we can protect your business with a well-planned agreement, or to set up an appointment please call me today at (805) 267-7147 or e-mail me at send me an email.