At the beginning of a new business, you need to construct a strong Florida shareholder and/or LLC agreement (depending on the structure of your business). These legally binding documents outline how your company should be run and protect you should issues arise down the road. If there is more than one person funding your business, regardless of whether they are partners or shareholders, it is absolutely essential to have these in place and signed by the relevant parties.
People starting a business together are typically positive and enthusiastic at the offset, but things aren’t always going to be as exciting as they are today. Take the opportunity today to plan for the potential challenges of tomorrow. We want to dive into six must-have elements of your agreement.
How to Split Voting Between Partners
Start by addressing who has voting rights on major decisions for the company. Once that has been determined, decide who can be the tie-breaker should things be split down the middle.
What to Do if One of the Partners Leaves
Whether they’re leaving on their own accord, are forced out, or even pass away, you need to prepare for what happens when a partner leaves. What happens then? Who replaces them? Can they sell their portion of the company? Can they pass it along to their child?
What to Do if the Company Gets Sued
It happens to even the strongest companies. At the offset of a business venture, you should establish rules for what the operating procedures are in the case of a lawsuit, regardless of what it is caused by.
Should the Company Have a Non-Compete Clause in Contracts?
Some companies include a provision saying that their shareholders or partners cannot work for any other companies in the same field. Is this right for your company? The answer depends on your industry and situation. Understand that these could soon be illegal, however.
Who Audits the Records?
Can any owner audit the company’s records at any time? Do you need a reason to do it? Do you have to be approved in advance? Can you only access it with the help of another member? Shareholders have rights to access company records and you need to have a mechanism in place to uphold those rights.
How Does the Company Close?
This goes back to addressing the hard times when you are just starting out: Is there an end goal for the company that involves the shuttering or sale of the business? Address what steps must take place for this to happen and who can be involved in that process.
How to Get the Help You Need
Many companies get started on the wrong foot by not addressing these issues in their shareholder or LLC agreements. Trust us, because we see the aftermath every day: it’s better to be proactive than reactive when it comes to shareholders or LLC agreements.
For help with your Florida business, contact The Law Office of Ray Garcia! We can help you build a successful business that allows you to live the life you really want.
Law Office of Ray Garcia, P.A.
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