Legal Question in Business Law in California

Re: Corporate Startup and Spouses

You should find a good business attorney in your area and retain them to draft a shareholder's agreement. A shareholder's agreement is always a good idea for a new entity with more than one owner. It controls what occurs if someone dies, divorces, becomes disabled, etc. Prepare it now while everyone is happy.

Re: Corporate Startup and Spouses

in a nutshell, there are various pre or post incorporation precautions you can take to help ensure your concerns in your question here do not manifest to your detriment. shareholder agreements, like all forms of contracts, are binding and can be legally worded by an attorney to help ensure the will of the "owners" is indeed effectuated. thus, we recommend that you consult an attorney to draft such an agreement protecting all principals mentioned in your question asap. if you would like a free phone consultation, email us today with your contact information.

Re: Corporate Startup and Spouses

Thank you for your email. In order to effectively deal with the situation you and your partners may wish to execute a buy-sell agreement and include spousal waivers. The waiver would include a transmutation clause.

Buy-sell agreements are often funded with life insurance so that in the case of a partner's death there are sufficient funds available to compensate the decedent's spouse for the shares so that the surviving partners retain ownership.

Our firm routinely drafts buy-sell agreements. As such, please feel free to contact me directly if you have additional questions at 619.233.0900.

Sincerely,

Re: Corporate Startup and Spouses

If you are not seeking the assistance of an attorney to set this up, you will later seek the assistance of an attorney to get you out of trouble. Contact an attorney to represent the corporation, not the individuals and review all and proceed.

Re: Corporate Startup and Spouses

You should atleast have a memorandum of understanding (MOU)between the partners which will have the clauses as you mentioned. Also, my suggestion, if any partner wants to sell their share in the future other partners will have the first right of refusal. Please take a look at my sit at www.lawyers.com/amyghosh

Re: Corporate Startup and Spouses

I have been practicing business law in the San Francisco Bay Area for over 30 years. I also teach in the law school and grant school and have taught corporate law, real estate law, business law, and numbers of other subjects. What your asking for me is quite simple but may take some time depending upon the desires of each individual and their own situation. I would be more than happy to meet with you, and by you I mean all of you, where we will discuss what kind of business entity to begin with the humane need. You may not necessarily need a corporation but may want to use in L. L. C., limited liability company, limited liability partnership, or some other form of business. There are numerous questions I would have because there are tax effects, effects upon ownership, survivorship, etc.. Your absolutely correct, and I am happy to you of thought I had to deal with potentials of divorce, problems in the business, death, disability and those would all be taking care of through some sort of written agreement between all the parties which all of these spouses will agree to let the same time. This is a joint effort and there must be joint agreement by all. I have seen numbers of successful individuals for these kinds of business relationships that lasted for years were not only day but their children have continued the tradition of the business they started. If we wish to contact me I would be more than happy to discuss this with you, detailing exactly what you would need and costs involved. I am so happy the farthest before doing it without agreement and just jumping into the fray which is really most of the questions I get from law guru in terms of help me we have grave problems. You may reach me at 925 -- 945 -- 6000.

Re: Corporate Startup and Spouses

Thank you for your posting.

Business succession planning can help reduce estate taxes and do what you want here - transfer financial interests, but not control interests, in the property. The most common business estate-planning tools are buy-sell agreements, Section 303 stock redemptions, Section 6166 estate tax deferrals and the qualified family-owned business exclusion. (Business-owned life insurance can also be used to fund each of these planning methods.)

A Buy-sell agreements is the traditional way of protecting business partners from sharing ownership with a deceased stockholder's family, and is what I would recommend in your situation.

As far as the form of buy-sell agreements, there are generally two - cross-purchase and stock redemption. In an insurance-funded cross-purchase arrangement, each business owner buys an insurance policy on the other, naming themselves as beneficiary. At the death of one of the owners, the surviving owner receives tax-free insurance proceeds to use in purchasing the deceased owner's stock from his or her estate.

In an insurance-funded stock-redemption arrangement, the corporation purchases the stock of a deceased shareholder. Here the business is the owner and beneficiary of life insurance policies on each shareholder. A partnership looking for a business continuation plan may use a similar arrangement called an entity purchase.

I hope that this information helps, but if you want more information, have further questions, or feel that you need legal representation, please feel free to email me directly at [email protected]. It's my pleasure to assist you in any way that I can.

Re: Corporate Startup and Spouses

What you want to accomplish can be done within the corporate form of doing business by contract, including a co-promoters' agreement, a right of first refusal agreement, a buy-sell agreement and/or Articles of Incorporation and bylaws provisions that allow the founders to keep control through hell and high water.

The same goals can be achieved more easily by organizing the business as an LLC (limited liability company). However, LLCs are not for every situation.

Whether the use of life insurance to fund a buy-up of stock is a good idea or not depends upon the value of the stock and whether the need to buy is triggered by the shareholder's death, on the one hand, or divorce, on the other.

I join the other attorneys who've answered your inquiry in recommending that the three promoters retain an attorney to draft all the corporate (or LLC)documents and handle the filings with the Secretary of State. In occasional instances each co-founder might need separate representation, but generally they can share counsel so long as there is no apparent conflict of interest among them.