Consider a routine scenario in advising business clients: two or more folks come to you with plans to start a company. Full of big dreams, plenty of optimism and the unshaking belief that nothing can go wrong, they ask you to advise on the critical issues of formation and capitalization. In addition to perhaps a dose of business reality, your clients (topic for another article) also need a document that governs the internal relationship between the owners of the new entity. The stockholders agreement (in the corporation context) or the limited liability company operating agreement (in the LLC context) serves this purpose and, when done properly, acts as a guide to the conduct of business throughout the life of the entity. The stockholders agreement is one of, if not the, most important documents to be discussed with your clients in the initial formation of a company.
The complete article, “Stockholders Agreement – Five Common Issues and How to Address Them,” first appeared on vc-list.com on March 31, 2017.