A family-owned business is a venture that can sometimes turn bitter without proper legal documents. David Barrett, who works closely with business owners to develop and implement leadership and ownership succession plans, spoke to Indiana Lawyer about how having solid agreements on ownership, operating agreements, shareholder agreements and succession agreements are of the utmost importance. "The contents of the documents can vary from business to business, but a key topic they should address is what happens in the event of a death or disability of the primary owner," said Barrett. "These agreements can require consent from multiple stakeholders, rather than just the principle shareholder, before the business is sold or makes a major investment."
Barrett talked about a unique succession agreement he assisted with when a father wanted to sell his business to his two children. The document outlined how the business would eventually be passed to the owner's grandchildren, who were pre-teens at the time. "That agreement was unusual, since taking the business through different generations makes the process more difficult," Barrett explained. "Here, the father wanted his grandchildren to replicate the path his children took into the business. Namely, he wanted the third generation to work for other companies and gain relevant experience before joining the family business."
Even putting together an unconventional business agreement doesn't have to be difficult as long as everyone is on the same page. "The key to a good business agreement is communication," Barrett added.