Legal Question in Business Law in California

Re: Incorporation Contract

If it is a corporation, they are not 'partners' but shareholders. There should have been a full series of documents and agreements created at the time of formation including PROPERLY drafted by-laws, corporate minutes, shareholders agreement, buy-sell agreement, key man insurance agreement, etc, etc. Those are what business people pay legal fees for in corporate formation; it's a cost of doing business. Better they spend a few dollars now, rather than litigate at enormous expense later when a dispute arises that would have been covered. I'll be happy to help them with what they need.

Re: Incorporation Contract

The nature of the contract will depend on the structure of the business (corporation, LLC, partnership, etc.). However, the basic terms will be the same, and will cover such items as what happens when one partner (or shareholder) dies, retires, becomes disabled, etc. Also, the parties' desires (does either want to pass his interest on to a child? Does the remaining partner want to buy out the other?) may dictate what the terms of the agreement are. If one partner is to buy out the other, or continue to pay a disabled partner, provisions for funding (disability and key man life insurance) should be included.

We have drafted and reviewed many partnership and shareholder agreements, and can assist in preparing one for your father and in negotiating the terms (if your father's partner does not agree 100% with what your father wants).

Re: Incorporation Contract

We have drafted and reviewed many partnership/shareholder agreements, and would be pleased to discuss this with you and your father.

Re: Incorporation Contract

Is it really a partnership? If so, and if proper books are being kept by someone who really knows how to account for the affairs of a partnership, well-established partnership law will step in to cover the interests of the estate and the surviving partner, to the extent an existing partnership agreement doesn't. The reason is that partnerships do not have perpetual existence, like most corporations and LLCs, so statutes cover what happens upon the inability of a partner to continue.

If the business is a corporation or LLC, the need for an agreement is greater, but after the thing has been running awhile, it may be more difficult for all owners to agree, so I think it is not a proper role for the son or daughter of an owner to step in and try to create a document that would be difficult for a trained professional.

Further, if the survivor wants, or is required, to buy out the family (heirs) of the deceased former co-owner, it may take a pile of cash to do so, plus an appraisal. Funding buy-outs is often done with insurance, but there are massive tax and actuarial issues to be dealt with. No place for a beginner.

Next, if the business is a partnership, maybe it should be incorporated for liability, etc. reasons. Most lawyers are advising against operating a risky business as a general partnership these days.

Finally, your father (not you) should be doing his estate planning on a more comprehensive basis, probably including setting up a living trust in addition to talking to his partner about succession, insurance, etc. issues. Possibly the partner should be represented separately, in case there are conflicts of interest. This is sometimes but not always desirable.

If you are an attorney, my apologies.