Why Do I Need an Operating or Shareholder Agreement?

Posted on in Business Law

Illinois business attorney, Illinois business laws, DuPage County business lawyerFor members of the Oakbrook Terrace Muslim community who are thinking about launching new business enterprise, it can be complicated to figure out how to draft an owner’s agreement. Different business structures have different forms of owner’s agreements.

The U.S. Small Business Administration helps to explain the distinctions among different kinds of business structures and the ways in which owner’s agreements can differ. Depending upon the type of business structure you have selected, your owner’s agreement will be entitled differently, but it should generally contain similar information. For instance, if you are forming a corporation, then you will need to create a shareholder agreement. If you are launching an LLC, however, you will need to create an operating agreement.

The information that you ultimately include in the owner’s agreement will provide guidance for handling a wide variety of issues that might arise at a later point in the life of the business. You should always discuss your situation with an experienced Oakbrook Terrace business lawyer before making decisions about a new business. An advocate at Farooqi & Husain Law Office can speak with you today.

Elements of a Shareholder’s or Operating Agreement

What do you need to know about each of these agreements, and why do you need to have one if you are starting a business? Generally speaking, a shareholder’s agreement or an operating agreement will answer a number of important questions that arise between or among the shareholders of a corporation or the owners of an LLC. For example, these agreements can help to provide answers to some of the following questions, which can prevent disputes in the future:

  • How will the corporation’s or LLC’s profits be split between or among the shareholders or owners;
  • What happens when a shareholder wants to sell her shares and get out of the corporation;
  • Can other members of the company force out, or buy out, another one of the shareholders? On a similar note, can one member of the company be removed from a management position but remain within the business;
  • Who in the business has the power or authority to fire another member? For example, if one owner of the business fails to do her job properly or commits a crime, who will make a decision about how the business will handle that owner;
  • If the business includes family members, what will happen to the corporation or LLC in the event of divorce;
  • How will major decisions about the business be made? For instance, will one voice have more weight than another? Will one method carry more force than another? In other words, who has the authority to make certain types of decisions; and
  • What happens when there is a disagreement among the people running the business? Can one shareholder file a lawsuit against another, or must the parties enter into arbitration?

Contact a Business Lawyer in Oakbrook Terrace

It is important to discuss your business plans with an experienced Oakbrook Terrace business lawyer, particular if you are in the process of preparing a shareholder agreement or an operating agreement. Contact Farooqi & Husain Law Office today to learn more about our commitment to the Muslim business community in DuPage County and about how we can assist you.

Source:

https://www.sba.gov/about-sba

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