Shareholder and Partnership Agreements – Why You Need One

At the beginning, a partnership will be so full of life and the long term expectations will be bright.  Most business partners don’t wish or even think a point will come when they can disagree hence leading to problems. Problems can arise and the partnership may not work anymore. To be on the safe side, it is important to ensure that there is an agreement in place before you even get into a partnership or a directorship/shareholding. This will have many advantages to you and the business in the event there are problems which cannot be resolved easily between the partners or directors/shareholders.

One of the benefits of having a partnership or shareholders agreement is that you are able to know the responsibilities of each of the partners or directors/shareholders. It is important to define what each partner will be responsible for in the business and what their contributions are in terms of capital. This will help in ensuring that you don’t end up doing all the work while the compensation is all the same among all the partners.
Assets are usually one of the hardest things that partners and shareholders fight over after a company or business fails.  To ensure that you are protected from such fights, you should have an agreement in place that stipulates exactly how the assets will be shared among the partners or shareholders.  Also, you will be able to account for everything the partnership or company acquires under the business. It simply puts aside personal property and that of the business.

In any business, losses are possible. There is need to protect yourself by ensuring that there is an agreement on how losses will be shared among partners in a partnership. Unless otherwise stated, losses are shared equally. All partners bear the cost of the loss. If you are a junior partner, you should make sure that you are aware of the percentage of the loss that you will have to pay. You cannot pay more or equal to those partners with more shares in the partnership or business.

Having a Partner or Director/Shareholder agreement will also give guidelines on what happens in the event the business entity is dissolved or what happens if one of the partners dies. A time can come when the business venture becomes totally nonviable thus leading to closure. There is need to ensure there are guidelines that govern the way liabilities will be handled and also how assets will be shared. If one partner or director/shareholder  also happens to die, it is important to have an agreement as to what happens to the shares or assets they have in the business.

To ensure you, your family and your business are protected, contact Joe Gilles for advice that’s relevant to your circumstances.

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