Friday, September 25, 2009

Operational Agreemets, Stocks and Spouses

When should you have an operational agreement? What about stocks in your company? When is the right time to establish roles and investment value?

In a word: NOW!

When it is time to do it; it is too late. At that point, something has gone south: trust in the partnership, money is suddenly very available (or not at all!), new investors are coming in or leaving, someone dies (yes, business owners die too!), business contraction, change in local codes or state laws, legal action and other unexpected events in the business' life cycle. Look to have at least two documents:
  • An operational agreement - which outlines how powers and monies are shared. It also helps the owners have segmentation in their duties and responsibilities.
  • Shareholder's agreement - the financial and legal transfer of ownership of the business. This outlines when, how and for how much the ownership can change. It also gives conditions of "first refusal" - when the business or partners have the right to buy shares in advance of their transfer or sale outside of the current business structure.
All this is important in the advance of life changing events like marriage, divorce or death. So if you don't have it place now, be sure to get it. When you say? NOW. See, I am not kidding. You will thank me later.

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