We all get along – do I still need a shareholders’ agreement?

You’re getting along with the other shareholders of your corporation and you are agreeing on everything – great! This is the best time to put a shareholders’ agreement in place.

If you wait until there’s a problem, you’ve waited too long and it’s now too late. If you aren’t getting along, the last thing that you’re going to agree on is the shareholders’ agreement. Think of it like a prenup for your corporation; you don’t want to wait until there is a pending divorce. That’s not the time for a prenup. You need to agree on the process for a breakup ahead of time when everybody is still on good terms.

The shareholders’ agreement does more than address the breakup process; it also covers other unfortunate events that can happen: somebody dies, becomes disabled, gets divorced, etc.

If you’re in business with a friend or a family member (especially if you’re in business with a friend or a family member) having a shareholders’ agreement can help preserve the personal relationship you have with the person. Even if you’ve gotten along well your entire lives, going into business can be very different than anything you’ve done together before. You may find out you have different visions for the business. Big dollar amounts, whether it be profit or risk/debt, will put an entirely new spin on your relationship. At least if you have the shareholder agreement, you have agreed on certain processes for worst case scenarios so you should avoid any dragged-out conflict that might otherwise take a long, stressful time. It also saves you money in the long run by addressing issues up-front instead of paying a lawyer on the backend to try and fix a problem.

You need to create the shareholders’ agreement while everyone is still getting along.