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Four Reasons Your Florida Business Needs a Shareholders’ Agreement

Whether you started up your business recently or have been operating for some time, you are aware of the different requirements for registration and ongoing compliance. Under rules enacted by the Florida Division of Corporations, LLCs, corporations, and other organizations must file annual reports and associated documents to remain in good standing. However, many stakeholders are not aware of additional ways to protect the business and their individual interests, as separate from the requirements established by law. There are options that benefit you and your company now, and as it grows or changes in the future.

A shareholders’ agreement is one such tool for companies with multiple partners, usually ranging from 2 to 10 individuals. There is no definite figure on the number of stakeholders, because these agreements are not mandatory under state law. Still, they are so effective in dealing with operational issues that you should view a shareholders’ agreement as a requirement. A Clearwater business lawyer can explain details, but an overview should be convincing.

1. The agreement clarifies dividends and distributions. The point of being a stakeholder is to gain a return on your investment, so you want details regarding payment of dividends. One critical point is outlining the process for distribution, such as what triggers a payment and who would be entitled to funds if there are different classes of shareholders. Another important factor is how to calculate the amount and identify the basis for paying dividends.

2. Partners maintain control over transfers of ownership interests. Shareholders in small businesses want control over who enters and who departs the company, so there are certain clauses to consider about transfers. In the event of death, disability, or termination of employment:

  • Remaining owners may acquire the exiting shareholder’s interests to keep the company closely held; and,
  • An individual shareholder will want assurances about liquidity of the ownership interest.

3. You can include protections for intellectual property and trade secrets. Shareholders who have access to important confidential information should not be allowed to take advantage of these trade secrets after exiting the company. A shareholders’ agreement should provide noncompete clauses and other restrictive covenants to protect them. If someone breaches, other shareholders can retain a Florida business litigation lawyer to enforce the contract in court.

4. You can avoid court action with a mandatory mediation clause. Disputes about routine matters and basic operations can create havoc, potentially leading to costly business litigation. It is wise to insert a mandatory mediation clause in the shareholders’ agreement, which requires owners to participate in the process before filing a lawsuit. Often, disagreements can be resolved through productive conversations guided by a trained mediator.

Discuss Shareholders’ Agreements with a Clearwater, FL Business Law Attorney

These are convincing reasons to prepare a shareholders’ agreement, and you can trust our team at Clearwater Business Law to assist with drafting all essential documents. To learn more, please call (727) 785-5100 to set up a consultation with a Pinellas County contracts lawyer. We can advise you on important details after reviewing your circumstances.