Why Your Family Business Needs a Shareholders’ Agreement

Uncertainty can wreak havoc. And that’s especially true when it comes to running a family business. Governing processes and procedures – well-established and firmly in place – can act as a glide path during times of major transition, both for the business and the individual shareholders. Often, the foundation for a smooth transition is a well-crafted shareholders’ agreement that specifies if, when and how shares in the business can be transferred, among other things.

It may seem virtually impossible to get all shareholders to agree on how share transfers and other contentious issues should be handled. Many business owners give up trying to come to an agreement and just hope for the best. That is not the best course of action.

Drew Steen, a partner in the business and tax practice at the law firm Davis Wright Tremaine (DWT), has written a compelling article presenting four reasons why you should forge ahead with drafting a shareholders’ agreement. For background and inspiration, read Drew’s article in the DWT Family Business and Resource Center blog. Interestingly, Drew points out that not all shareholders have to sign off on the agreement for it to have a positive impact.