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Partners and Shareholders FAQs

(Frequently Asked Questions)
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  1. I want to go into business with my brother. We totally trust each other. Why would we need a written agreement?

  2. My dad is willing to finance my business, but he doesn't want to manage it. Can we still be partners?

  3. I'm starting a company with some college buddies. We've known each other forever, but what if one of them sells his or her shares to someone I don't trust?

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1. I want to go into business with my brother. We totally trust each other. Why would we need a written agreement?

Sometimes, a business partnership affects other people, like your spouse. What if one of you has an accident, gets married or gets divorced? Talking through these issues now can prevent misunderstandings later.

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2. My dad is willing to finance my business, but he doesn't want to manage it. Can we still be partners?

Your father would likely prefer to be a "limited partner," with no management responsibilities and limited liability. You can specify in the contract the scope of each partner's contribution and responsibilities.

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3. I'm starting a company with some college buddies. We've know each other forever, but what if one of them sells his or her shares to someone I don't trust?

In a shareholders' agreement, you can restrict share transfers. For example, one type of clause requires the approval of shareholders or directors (likely you) on all share transfers. Another common clause gives existing shareholders the right to buy shares before they are sold to anyone else. The same rules apply for issuing new shares. This way, if one of your buddies wants to sell her shares, she has to offer them to the rest of you first or get your approval for the sale.

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Legal disclaimer:  The information provided on Lawyers-BC.Com is not intended to be legal advice, but merely conveys general information related to legal issues commonly encountered. Your access to and use of this Web site is subject to additional terms and conditions.

This page last updated: September 23, 1999
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