Almost nobody goes into business with a pessimistic attitude about what the future holds. But what happens if a business partner dies, files bankruptcy, gets divorced, or simply doesn’t perform as anticipated? In the absence of clear and complete agreements between co-owners, Illinois laws impose some basic, default provisions about how a business’ profits and losses must be allocated, etc. However, effective written business planning agreements can go a long way toward keeping owners in charge of their own business.
Daniel J. Kollias has experience in planning, negotiating, drafting, or modifying the kinds of business planning agreements that allow businesses to run smoothly when unforeseen circumstances arise. We are ready to help with each of those steps, so that your Shareholder Agreements, Operating Agreements, or Buy/Sell Agreements will truly reflect your wishes and protect your business and financial interests.Shareholder Agreements
What happens if a shareholder in a small business decides he wants to retire, or sell his shares? What happens if a divorce court deems those shares to be “marital property,” and awards them to a partner’s spouse? What happens if a shareholder dies, leaving his estate to someone without the desire or ability to run a business? Shareholder agreements are powerful tools to address such circumstances before they happen. The powers and rights of shareholders can be defined and limited by a well-drafted shareholder agreement, custom tailored to the particular needs of an individual business and its shareholders. Shareholder agreements can also spell out particular voting procedures that shareholders must follow, and may impose restrictions on a shareholders’ right to sell or transfer their shares.Operating Agreements
Much like shareholder agreements, which apply to corporations, operating agreements establish the rules by which a Limited Liability Company is run. For LLC’s with multiple owners (members), the Operating Agreements define each member’s percentage of ownership, voting power, and rights and responsibilities related to the management of the company. They can also designate non-owner managers to run the day to day operation of the company, and define how those managers are chosen. Operating agreements define how the company’s profits and losses will be distributed among the members, and often include buy/sell provisions as shareholder agreements do. Operating agreements are even useful for LLC with a single owner, as they define the business’ structure, clarifying the fact that it is not a sole proprietorship and tax treatment.Buy/Sell (Succession Planning) Agreements
Any well drafted shareholder agreement or LLC operating agreement ought to contain provisions for succession planning. Through a Buy/Sell (or “Buyout”) Agreement, business owners can make their own rules as to whether or not their company must “buy out” a departing shareholder, and at what price; whether the company should have right of first refusal in case of a sale; any restrictions on who may buy the departing owner’s shares; and any other terms related to an owner’s departure or disability.
Nobody can predict the future. Having a well-drafted Buy/Sell Agreement in place can go a long way toward ensuring that your business will be able to run smoothly even under the most difficult of circumstances.