Remember that some entities allow for slicing and dicing of rights with respect to shares of ownership. That means that you can own voting rights and economic rights, and you can separate the two of them. Other entities do not have that type of flexibility. In...
It’s very common to build in a right of first refusal into a governing document. It’s a way of keeping the shares in the family. The way it works is that the partners have a right to match the material terms of any bona fide offer from a third party....
Termination of employment is a common trigger of an involuntary transfer. If you give a key person equity, and they leave the closely held company, then typically they cannot and reasonably should not retain their shares. They are are exceptions, but this is a common...
Death is a common trigger of an involuntary transfer. Without a trigger, a person’s death does not sever their interest in the business. The heirs of an owner that is a person will be identified by his or her will or by the statute. Such heirs will take over ownership...
Corporations (C and S) do not have the ability to allocate distributions of available cash to the partners in any way that is contrary to their percentage interests (pro rata). It’s really simple for them which can be good or bad depending on your goals. On the other...
Regardless of entity type, it’s important to address meetings. There’s two kinds of meetings: shareholders’ meetings and meetings of management. Shareholders typically have an annual meeting. Management meetings typically meet more frequently. Election of management,...