Shareholder / Partnership Disputes
When forming a business, spending time pouring over legal details and establishing by-laws may be the last thing you want to think about. However, investing time to set up your business properly at the onset can save you significant time, money, and stress later on. If you are forming a partnership or other business entity that involves two or more shareholders, clearly defining your business arrangement is key to having your enterprise run smoothly in the long run.
Types of Shareholder Disputes
Anyone who owns shares of stock in a business is known as a shareholder. For many small businesses, the shareholders may just be two or more partners who collectively own the venture. In corporations, the shareholders may be tens, hundreds, or even thousands of individuals, depending on whether or not the business is publicly traded and how large it is.
As your business grows over time, the potential for a shareholder or partnership dispute increases. These disputes can arise if the by-laws of a business are not clear and do not outline how shares are treated when a shareholder or partner:
- Leaves the business
- Becomes disabled
- Files for bankruptcy
- Files for divorce
- Dies
The actual value of shares of stock may also come into question when a shareholder or partner decides to sell his or her stock or buy another shareholder’s shares. If the valuation formula is inaccurate or out of date, or if prescribed actions for these scenarios are not explicitly outlined in the company’s by-laws, a costly legal dispute may arise that could hinder the success of your business. It is therefore important to seek legal advice when forming and organizing your business to ensure that you minimize the risk for shareholder disputes.
Contact Us
To speak with an experienced Texas business formation professional regarding the legal details of establishing your business, please contact Texas Legal Entities today by calling 512-472-2431.
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