Founding Owners’ Agreements

When entrepreneurs or other business people are starting a business, they naturally do not focus on what might happen after the business has commenced and there are issues that arise among the different owners of the business. As time goes by, the co-owners of the business may develop certain understandings or expectations that are quite different from what was originally agreed upon at the founding of the business. For these reasons it is always best for the business owners to enter into various written agreements to provide for guidance later in time.

The agreements that the founding owners of the business enter into should cover a wide range of issues. For example, the founders will need to address how each will transfer ownership of any property that will become the property of the new business. There may be a need for employment agreements, a buy/sell agreement, stock option plans and stock restriction agreements. If one of the founders provides intellectual know-how, then there should be a invention assignment agreement to make sure that any inventions and works created belong to the business and not the given founder in his or her individual capacity – if that is the intent. Confidentiality and non-use agreements will help protect intellectual property and trade secrets.

Because businesses are running on limited funds at the start up phase, it may not be practical to have every necessary agreement in place at the beginning. For this reason, it will be important to determine what particular agreements will be minimally necessary. In the beginning, or soon after start up, it is advisable for the founders to at least enter into a buy/sell agreement to provide for business operations, management, tax and estate planning mechanisms.

This discussion is not legal advice, a solicitation of you as a client, nor the engaging in the practice of law in any jurisdiction. This discussion is merely for information/education and should not be relied upon for legal advice by anyone because the facts discussed may be different from your own situation. If you need legal advice, consult a qualified attorney. For more information please visit my website at http://www.palacioslawoffice.com.

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About Elio Palacios, Jr.

Attorney Elio Palacios, Jr., represents individuals, corporations, entrepreneurs, small businesses, startups and early stage businesses, physicians, dentists, and healthcare businesses in corporate, business and commercial transactions and litigation. He also counsels employers and individuals on visa, immigration and naturalization matters. Visit www.PalaciosLawOffice.com to learn more.
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