Starting a business with friends is exhilarating. The shared dreams and late-night brainstorming sessions create an atmosphere of boundless potential. And with the trust and understanding between friends, a formal shareholder agreement might seem unnecessary. However, the truth is, precisely because you are friends, you need one.

Preventing Misunderstandings

A shareholder agreement is a contract outlining how a company operates and the rights and responsibilities of its shareholders. Despite being friends, misunderstandings can arise in business. A shareholder agreement isn’t a lack of trust; it’s a proactive measure to prevent misunderstandings, ensuring clarity for all parties involved and helping to maintain friendships.

Planning for the Future

Another crucial aspect is planning for the unforeseen future. What if a shareholder wants to sell their shares? Or in the unfortunate event of a shareholder’s passing? Having a shareholder agreement in place offers pre-agreed solutions, avoiding conflicts down the road.

Fair Decision-Making

Additionally, a shareholder agreement establishes a fair decision-making process, covering both daily operations and significant business moves like company sales or structural changes. This predefined roadmap minimizes the potential for future disputes by ensuring everyone has agreed to the decision-making process upfront.

Protecting Your Business and Friendship

Above all, a shareholder agreement safeguards both your business and your friendship. It acts as an insurance policy, ensuring fairness and clarity for all involved, preventing disagreements from escalating and preserving friendships amidst business challenges.

While embarking on a business venture with friends is thrilling, it’s crucial to recognize the legal and financial responsibilities involved. A shareholder agreement may seem unnecessary during smoother times, but its presence can save considerable trouble and costs in the long run.

In essence, you need a shareholder agreement not despite your friendship but because of it.