20So you have a group of like-minded individuals, ready to band together as a corporation or a company (or partnership, though less common these days) to start making, distributing and selling beer. Great! At this time, everything is exciting, positive and generally everyone tends to get along.
Once business is moving along, though, things always happen, issues always pop up, and unfortunately no one can ever foresee every problem that could possibly occur. When this happens, without a process or road map for sorting through each issue, companies break apart and go out of business quickly. The solution? Put together an agreement while everyone is still happy and agreeable laying out the procedure and processes to resolve issues that inevitably appear during the lifetime of a business. For a limited liability company (LLC), this agreement is called an operating agreement, and it is signed by all of the members. For a corporation, it’s called a shareholders agreement, and is obviously signed by all of the shareholders.
These agreements cover a bevy of issues and lay out procedures for resolving issues with the business, from making business decisions where all members or shareholders may not agree, to transfer of ownership restrictions, purchase options, rights of first refusal, location and times of meetings, how an outsider can buy into the entity, etc. What happens if the business needs an influx of capital? If it cannot get a loan to cover its needs? Will the members contribute more? What if a member wants to leave the company? At what price can the other members buy that member out and how is that price determined? Who determines it? Unless all of the members have agreed up front, and entered into a business “pre-nup”, it is almost guaranteed that some of the issues mentioned above are going to cause long, drawn out conflicts and arguments for the members to resolve. With an agreement in place, the issues are much more easily resolved in an expedient and efficient manner, and the business is more likely continue
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