As a business owner, you have dreams that your enterprise will grow by leaps and bounds over time or even within a given period. These plans enable you to stay focused and make decisions that will keep you on track. A proper SWOT (strengths, weaknesses, opportunities and threats) analysis, for instance, will help you determine your areas of strength and weakness.
If you own your business with one or more partners, a potential pitfall to growing your business could dealing with ownership disputes. You may be surprised to learn that they often come when the business is doing well. This is typically because there are profits to split. The good news is a well-written business ownership agreement can help you avoid damaging discord or confusion about roles and responsibilities. Here are some of the key points to keep in mind:
The Importance of Ownership Agreements: Understanding the Pros and Cons of a Buy-Sell Clause
When forming a business, it is crucial to have a well-written ownership agreement between all of the members, shareholders, or partners. Depending on the type of business entity, the agreement will either be a Shareholders’ Agreement (Corporation), Operating Agreement (Limited Liability Company), or Partnership Agreement (Partnership). Regardless of the type of entity, the goal of an ownership agreement is to clearly lay out the “rules” and procedures by which the company will operate. It is important to have a governing document that makes clear the rights of each owner as well as how business decisions will be made within the company. Read more at MHPBV…
As the post above describes, a written agreement will eliminate any loopholes that may arise as time goes by. It ensures that all the stakeholders are on the same page and know what is expected of them, as well as what to expect from the business operations.
While setting up an agreement is vital groundwork for creating a new business, there are areas of the contract that need to be reviewed regularly as the business continues to grow and develop. The following post explains some of the areas you need to keep tabs on:
5 Provisions in Business Agreements Owners Must Regularly Review and Revise
Is your Corporation Shareholder/Buy-Sell or Limited Liability Company Operating/Partnership Agreement up to date? Does it still reflect what you would want to have happen upon the occurrence of a certain event?
Successful business owners know firsthand that the businesses they run today rarely resemble the businesses they originally started. This is often the result of years of hard work and significant investments of time, labor and capital. Similarly, the agreements business owners executed at the time their company was originally formed likely have become outdated, and have not kept pace with the business owners’ or the company’s growing needs. Read more at Vanguard Law Mag…
Growth brings change for any business venture, and as the post above describes, you need to address these changes in your business ownership agreements. When there are so many things to do in a growing company, it can be difficult to stay on top of this. But making it a priority will help you be ready for any issues that might come up.
If you are in a family-owned business, you may be wondering how to organize the members of the family within the business. The last thing you want is a dispute that fractures relationships. The following post offers advice on how you can avoid tension in your family by adopting one of five ownership models according to your specific needs:
The 5 Models of Family Business Ownership
One of the first questions we ask clients is, “How do you own your family business?” Often the response is legalistic: “We are a limited liability company” or “Our shares are held in trust.” This information is essential, of course, but it leaves unanswered the more fundamental questions: “In your family business system, who gets to be an owner? And what, precisely, does ownership mean to you?”
The lack of awareness that family business ownership requires a set of choices is perhaps the greatest – and most harmful – misconception in the field of family business. Indeed, a failure to understand your ownership options can ultimately cripple your business, causing it to lose its competitive advantage, even resulting in buy-outs or sales that nobody really wants. Read more at Harvard Business Review…
If you need legal advice or services related to setting up a business, drawing up ownership agreements, reviewing contracts presented by another partner or any related matter, don’t hesitate to call Meek Law Firm. Attorney Jonathan Meek can provide you and your company with expert legal guidance and representation. For more information, contact Meek Law Firm today. Call (704) 848-6335 or use the contact form on the right of this page to schedule a consultation appointment.