A new client came to me recently for guidance after her relationship with her business partner went south. They were joint shareholders in a company that was actually really my client’s baby, with almost no contribution being made by the other shareholder. Of course, the other party didn’t see it that way!
There was no written shareholder agreement, which was bad news for my client. Without an agreement, it is very hard to work out what the real understanding between shareholders was when they got together. And even harder to bring about a legal separation that is fair to both parties.
If there is one thing I’d like people going into business with others to do, it is: please, please, document your relationship! Use a shareholder agreement to state:
what each of you is contributing,
what your responsibilities are,
whether you will have non-competition restrictions,
and how you will separate when the time comes.
It’s never too late to try to put an agreement in place, especially if the relationship is still good. And it’s time and money well spent.
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