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Understand the importance of a shareholders agreement

Divorces can happen to any married couple, even those who seem like they have it all. The reality is that no one really knows if a marriage will break down, and even with work, sometimes, they fall apart.

If you run a business with your spouse, then you should consider having a shareholders agreement before you see your marriage fall apart. A shareholders agreement is like a prenuptial agreement, but instead of protecting you personally, it's protecting your business.

Like getting married, businesses are also intended to be long relationships. Similarly, people who go into business together don't always want to stay in business together. Shareholder agreements make it easier to end a relationship while protecting a business. It will place restrictions on how to transfer shares to a third party, for example. That means that you can choose to restrict who may obtain more shares of the business instead of letting someone new in the door. For instance, you could restrict the shares to being sold to your immediate family or only to the other founders of the business.

A procedure should also be set up to address the potential for a partner to die. If that happens, there has to be a clear transfer of his or her shares to others to maintain the integrity of the business. The agreement should state how to buy those shares if the need arises.

Business is complicated, but with the right legal framework, it's a structured process. Your attorney can help you prepare a strong shareholder agreement to protect your business.

Source: FindLaw, "Breaking Up is Hard to Do: Why You Need a Shareholders Agreement," accessed June 07, 2018

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