When starting a new business venture, setting up a company agreement is crucial. This legal document outlines the internal workings of your business and defines the roles and responsibilities of each member. From a legal standpoint, a company agreement is a written contract that protects the interests of the business and its partners.
So, what should be included in a company agreement? Here are some essential elements:
1. Business Structure: Define the type of business structure you have chosen, such as a limited liability company (LLC), partnership, or corporation. This section should also include the company`s name, address, and purpose.
2. Ownership: Outline the percentage of ownership that each partner has in the business. This section should also detail the process for buying and selling shares or interests in the company.
3. Management: Define the roles and responsibilities of the management team, including who will make major business decisions, such as entering into contracts or making large purchases.
4. Finances: This section should cover how the business will be financed, including how profits and losses will be distributed among the partners. You should also outline the responsibilities of each partner for managing finances, such as keeping proper financial records.
5. Dispute Resolution: No matter how harmonious a partnership starts out, disagreements are bound to arise. Define a process for resolving disputes, including who will be responsible for mediating conflicts.
6. Exit Strategy: Although it may be difficult to think about the end of a business, it`s important to have an exit strategy in place. This section should detail what happens when a partner dies or wants to leave the business.
Once you have drafted your company agreement, make sure it is reviewed by a legal professional. This document is legally binding and can have significant consequences if not done correctly. By setting up a company agreement, you`re protecting your business and ensuring that everyone is on the same page.