Washington, DC asked in Business Formation for Maryland

Q: Do I need a partnership agreement for a Stock Corporation? We have four members (2 husband and wife members).

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1 Lawyer Answer
Mark Oakley
Mark Oakley
  • Rockville, MD
  • Licensed in Maryland

A: Definitely you should have a stockholders agreement, to cover disputes over major decisions, control of the company, how matters are resolved (majority vote or unanimous), restrictions on resale of stock or issuance of new stock to new owners; the authority of the president to fire or modify the salaries of lesser officers who are also stockholders; what happens in the event of divorce, death, disability or retirement; how profits and revenues are handled; how salaries are set; how and when dissolution occurs; the right of shareholders to engage in outside businesses or competing businesses; authority of individual stockholders or officers to act on behalf of, and bind, the company on debts and contracts; signature authority to write checks and spend the company’s money, or limits imposed without second signatures or approval; the number of hours or restrictions imposed on stockholders devoting time and effort to the company business; right to access company books and records; capital contributions and future obligation to invest further in the company to cover operating expenses; what state laws govern; the accounting and tax rules the company must adhere to; etc., etc. A business with more than one owner that does not address these issues in a comprehensive agree among the owners has a very large legal expense and litigation in its future when the inevitable happens and there is no agreement in place. A good solid agreement can solve issues and keep owners in good relations before disputes can occur, because the resolution is in the agreement.

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