Legal Question in Business Law in New Jersey

Re: business corporation

This is what you hire a business law attorney for. You should have a clear written agreement between the partners saying exactly what will happen. A couple hundred dollars in lawyer's fees will save you endless grief and probably thousands of dollars in lawyers' fees if you have to fight about it. And you have one less thing to worry about.

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Re: business corporation

This is a very good question with good timing. There are a number of important reasons to involve an experienced business lawyer in the setup of a company. You have hit on one of them.

If your partner dies, his interest in the business will pass with his other property. Perhaps that would be by will, perhaps it would go to his heirs. Either way, it probably will go to somebody who is not qualified to be your partner and not going to contribute to the business. Usually that is not what the business owners want for themselves but it is what they will (eventually) get unless there is a written agreement that says otherwise.

Be a little cautious here. The forms for shareholder buyout for a corporation are not good prototypes for LLCs. The reason is that in most LLCs the owners expect to earn from their labors and only put in as much capital as they need to do that. In contrast, in a corporation, a large fraction of the owners expect to earn mostly on their investment without personal effort. The needs are different and the agreements that many lawyers adapted from corporations are frequently not much better than nothing.

Invest in some of your lawyer's time. Get a good Operating Agreement that is suitable for your business. Tie it with a buyout and succession agreement and sleep well.

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Re: business corporation

The simple answer to your question is yes. The two possibilities you mention are examples of issues that should be covered in an operating agreement or separate buy-sell agreement.

Of course, this simple answer should not be considered legal advice since we do not at this time have an attorney client relationship. If I can be any service in helping you please feel free to contact me.