5 Common Elements of a Shareholder Agreement for Startup Companies
Oct 12 2022 0

5 Common Elements of a Shareholder Agreement for Startup Companies

There are many reasons why a company would want to draft and have in place a shareholder agreement. As a legal document, a shareholder agreement will outline what rights and obligations the shareholders of a company have. Typically with multiple shareholders, having such an agreement in place keeps everyone abreast of the way in which the company will operate, as well as what rights and obligations exist.

A shareholder agreement can be customized to the needs and objectives of the company and the shareholders. As such, it can include several different provisions. Ultimately, the final document should protect the interests of the company and its shareholders. Due to the importance and weight that shareholder agreements have, working with an attorney when creating one is essential. An attorney that is knowledgeable in business law matters in California can make sure the agreement touches on all critical aspects of business operations, shareholder rights, and how conflict resolution is handled.

The Los Angeles shareholder agreement attorney at the Leiva Law Firm is ready and prepared to support your company and team by helping you get started on creating a shareholder agreement.

What to Include in a Startup Company’s Shareholder Agreement

5 Common Elements of a Shareholder Agreement for Startup CompaniesAs stated earlier, with many shareholders, it makes the best sense to put together a shareholder agreement. However, if you are a startup company in California and are unsure about why a shareholder agreement is necessary, consider the following:

  1. Startups that would like to keep specific founding shareholders in power can make sure to address the method that will be used for how shares will be sold. Here, including the first right of refusal would work. 
  2. Disputes are undoubtedly going to arise in the lifecycle of a business. Having guidelines in place for resolving disagreements can help a company avoid complicated legal challenges that can be drawn out and drain both valuable time and funds. This is incredibly important for startups that have limited resources in the initial stages of business operations.
  3. Defining how dividend payouts will work is another essential element that can minimize the chances for future disputes.
  4. Those who are employed at the beginning of a business venture can drastically change as the business grows. The shareholder agreement should address what happens to shares should a shareholder cease to be employed with the company.
  5. Clearly outlining the rights of the shareholders with the possibility to include certain protections for some is a fundamental aspect of a shareholder agreement for startups and well-established businesses.

Speak with a Business Attorney in Los Angeles Today

Every detail matters for a startup to be successful and as it evolves, the number of shareholders may increase. A solid shareholder agreement offers necessary legal protections that can be modified as the company expands and changes. Getting it right can not only help your company thrive but also protect it from costly legal battles that may arise.

Call the Leiva Law Firm today at (818) 519-4465 to schedule a free consultation to discuss all of your business needs including shareholder agreements.

You Might Also Like