Any corporation or limited liability company with two or more unrelated shareholders should have a shareholders’ agreement. The agreement is called a members’ control agreement in the case of a limited liability company.
This agreement defines the relationship between the shareholders or members. Many disputes between shareholders or members can be avoided if business terms are agreed to by the parties prior to starting business.
Agreements usually address the following terms: price of stock, restrictions on the sale of stock, right of first refusal by the business to purchase stock, process for buying out shareholders in the case of death or disability, process for dispute resolution, and other matters.
Generally, shareholders or members start out with basic contract terms and then modify the terms as the business goes along and issues come up that must be resolved. The agreement normally provides that future shareholders or members will be subject to the terms of the agreement.