Why Do Minnesota Business Owners Need an Agreement?
Agreements between the owners of a new business are an essential part of forming a new business. Shareholder agreements apply to owners of corporations; member or operating agreements apply to owners of limited liability companies. These contracts cover rights and responsibilities of the various owners by setting the internal rules for the control of the business and affairs of the corporation, its liquidation and dissolution, or the relations among owners.
Disputes between owners (or between owners and the company) happen from time to time. These contracts can help avoid disputes, or help resolve disputes that occur.
What Should Be in an Agreement between Owners?
There is a wide range of issues that may be addressed in an agreement between business owners. Typical provisions include the election of a board, appointment of officers, expectations of owners, financial rights and responsibilities, and other issues concerning the management of the business.
Why Agreements Between Owners Matter
Disputes among owners happen. Written agreements between owners proactively manage these disputes by providing clear methods to resolve disputes
Decision-making authority is another crucial area that agreements between owners often address. Business owners need clear procedures for installing and removing officers of the business. An owner’s ability to take part in decisions regarding the people who manage the business is crucial for control of that owner’s investment.
Agreements between owners can limit a majority owner’s rights, or provide additional rights to minority owners. Often there are owners who bring money into the business, while others bring skills, time or an idea. Establishing the rules at the start of the business protects the investment that each different owner might bring into the business.
Agreements between business owners often provide guidance for what happens in the dissolution or liquidation of the business. Disputes about what to do with the business assets when the business closes avoids expensive disputes when there are limited assets at stake.
Agreements between business owners should be in writing and signed by all owners. A well-formed agreement is a road map for resolving disputes business owners hope to never encounter.
Contact an Experienced Attorney to Help Draft an Optimal Agreement
Templates and form contracts that are widely available on the internet are not sufficient. Your business has unique considerations, challenges, vulnerabilities, and opportunities. The best way to protect the long-term viability of your business is to speak with a personable and knowledgeable Minnesota attorney. Call Grabitske Law today to discuss your legal needs.