There are several basic types of business entities. Corporations are owned by Shareholders. Limited Liability Companies are owned by Members. Partnerships are owned by Partners. In the absence of a written agreement among the owners, the law imposes rules for the management of each of these business entities. But business owners are well advised to take the time to put their specific agreements and expectations in writing – a shareholders’ agreement in the case of a corporation, an operating agreement in the case of a limited liability company, or a partnership agreement in the case of a partnership. In the event of a dispute among business owners, a written agreement may be vital to the enforcement of the understanding that led to your decision to become an owner of the business in the first place. Items like owner’s compensation, voting rights, managerial responsibility, capital investment, buyout rights, and many others, can all be the subject of a written agreement. I enjoy handling business divorce matters. But litigating factual disputes over the specific terms of the owners’ oral agreements may needlessly result in a protracted case, where a straightforward written agreement may have prevented the lawsuit, or substantially reduced its scope. Remember to put it in writing.
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