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Why You Need a Shareholders Agreement

If you’re about to start a new business, or you already own a business, it’s important to protect your rights.  Businesses can be complex and because of this, many disagreements can arise.  That means that the best thing to do for your business is to draft a shareholders agreement.  This is a document that involves every shareholder in the company that specifies what will happen in the case that there are disagreements within the company.  Some of the most important things that will be included in the agreement is introduced below.  (Related topics: corporate law attorney near me, trusts and estate attorney, estate litigation)

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Shareholder Deadlock

A deadlock is when 2 shareholders that both own 50 percent of the company and own equal voting and management rights are not able to agree on how to run the business.  This conflict among the shareholders can seriously harm the overall company and ruin the relationship between the two in charge.  Because this is a common occurrence, many business owners choose to make an agreement beforehand just in case their relationship falls out.  This would then be put in writing and be included in the shareholders agreement.


Sale of Shares

If one of the owners decides that they want to share some or all of their shares, they will have certain regulations under their shareholders agreement.  This agreement will specify things such as if the other owner has priority in buying the shares or if they can veto where the shares are sold.



In the agreement, the roles of each person should be identified.  By doing so, there is a clear expectation of each person and if the owners begin to fight over responsibilities, they can reference the shareholders agreement.


Non-Compete Agreement

A non-compete agreement states that neither parties can start a similar profession or trade in competition against another party.

By writing a shareholders agreement, you will save yourself from further problems in the future.  There are corporate lawyers who can help you and your partners write a shareholders agreement that is fair for everyone.