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Home / Videos / Why do I need an operating or shareholders agreement?

Well, consider it like a business prenup. Like a lot of marriages, businesses also end at some point. There are really four categories that you want to put in these agreements. One deals with management, the other deals with value, the other deals with exits, and then the fourth, restrictive covenants.
So with management, you put into these agreements how you want to be governed, whether there's going to be a president, a CEO. Is it going to be a board making decisions? Those are the types of things you would put in these types of agreements. As far as exits, there are going to be exits. Bankruptcy, disability, death, retirement, or, if other partners want to force a partner out. The value, what's the value going to be? There's a lot of ways to calculate the value. Cash basis, accrual, appraisal, some formula. Then, finally, you put in restrictive covenants to protect confidential information, or to prevent other partners, if they leave, from taking employees or clients or customers. And then, maybe even a non-competition. So there's a lot of elements that would go in these agreements.

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