Stormy Seas for Businesses That Neglect “Divorce-Proofing” Shareholder Agreements

By: Howard Lang, Esq. and Rob Lang, Esq.

Litigation between business partners, sometimes termed “business divorces,” can be as ugly, contested, high-stake, costly, and emotionally taxing as family law divorces. These disputes commonly occur between partners regarding governance, valuation, and fiduciary duties, among others. Shareholder agreements (or operating agreements for LLCs) serve as the business partners’ prenuptial agreement, creating foresight and certainty for all parties in the event that the business marriage goes sour. Although not guaranteed, shareholder agreements will help partners keep the emotion out of a business divorce when a dispute arises. In such a situation, it is helpful to have a “rulebook” that everyone signed onto at the outset of the business.

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