Directors are the individuals who direct or guide the corporation with respect to its overall business model and, well, direction. The board sets policy and votes on major or extraordinary decisions. Shareholders elect directors, and directors elect officers. The “board” is the entirety of all of the directors.
Whether for a corporation or in any business or political setting, bylaws are the rules that govern the procedures of the particular entity. In a corporation, the bylaws is the set of rules which address, for example, when meetings will be held, and what the duties of the officers are. Though it’s a standard document […]
Need? No. But if I were a litigation attorney who made money off of people’s mistakes, I’d say “Don’t have one and let the chips fall where they may — better yet, let state law govern your rights and duties.” But I’m in the business of preventative law. So, yes, you should have an operating […]
No, no, and no. In California, all that’s required for a contract (which is what an operating agreement is) to be effective, other than for residential real estate contracts, is a signature. And if the contract provides for an alternate method of signature, like exchanging documents in PDF format over email so that the signatures […]
A Shareholders Agreement, if written correctly, will a) limit each shareholder’s ability to transfer his/her/their/its shares in a corporation, b) provide for certain voting rights or limitations on voting rights, and c) give the corporation and each shareholder the option to purchase the shares of a deceased or withdrawing shareholder. Its purpose is to minimize […]
Well, without it, you could easily be engaged in litigation down the road. By way of example, without an agreement in place, the shares of a deceased shareholder will vest in that shareholder’s heirs, who will then be able to review the corporation’s books and vote. If that person doesn’t understand what’s best for the […]
Frequently a Buy-Sell Agreement is the name used for a Shareholders Agreement in a corporation. Sometimes, though, a Buy-Sell Agreement only refers to that part of a Shareholders Agreement that provides for the remaining shareholders to purchase a deceased or withdrawing shareholders’ shares. Though a solid first step, ideally your corporation would be protected by […]
Unanimous voting rights can bog down the governance of any enterprise, especially where there are several owners. Sometimes it’s necessary when, say, you have only two owners and they both want to be sure to be included in every decision. Typically, though, unless required by law, you’ll want to avoid unanimous voting requirements, opting instead […]
Voting rights in your entity are an important element of its governance. Sometimes a minority investor, or group of investors, may want the right to vote (or veto) certain business decisions, even though they don’t have the equity to sway a vote. Nevertheless, you may want to give them certain veto rights as part of […]
Capitalization can mean a couple of things. At first it usually refers to the contributions of money or property that the owners (shareholders or members) have contributed to the business, their “capital contributions”. Later on, or as a result, or in anticipation of such contributions, it may refer to a capitalization chart or table, which […]