Shareholder Agreements The “Prenup” for Your Business Partnership Incorporating a business establishes its existence, but it does not govern the relationship between the owners. What happens if a partner wants to leave? What if a partner dies or gets divorced? A well-drafted Shareholder Agreement is essential for any multi-owner corporation. It sets the rules for exit strategies, dispute resolution, and stock valuation before a conflict arises. Essential Provisions We Draft1. Right of First Refusal (ROFR) Prevent your partner from selling their shares to a stranger without your approval. The company or existing shareholders get the first right to buy the shares at the same price.2. Buy-Sell Agreement Mandatory buyout triggers for the “5 D’s”: Death, Disability, Divorce, Departure (Firing), or Disagreement. This ensures the business stays with the active partners.3. Valuation Methodology How much is the stock worth? We define the formula in advance (e.g., EBITDA multiple, Book Value, or Annual Appraisal) to avoid expensive litigation later.4. Deadlock Resolution In 50/50 partnerships, disagreements can freeze the business. We draft “Push-Pull” or “Shotgun” clauses to break the deadlock and allow one partner to buy out the other. Protecting Minority vs. Majority Rights Depending on your ownership percentage, you have different risks. A good agreement balances these interests. Drag-Along Rights (For Majority) If the majority finds a buyer for the whole company, they can force the minority shareholders to sell their shares too, ensuring a clean exit. Tag-Along Rights (For Minority) If the majority sells their stake, the minority has the right to “tag along” and sell their shares at the same price, so they aren’t left behind with a new, unknown partner.Immigration Impact? L-1 & E-2 Visas: If you are a foreign investor, giving up too much control in a Shareholder Agreement (e.g., negative veto rights for minority partners) can endanger your visa eligibility. USCIS requires you to maintain “Control.” Review Your Structure Draft It Before You Fight The best time to sign a Shareholder Agreement is when everyone is happy. Once a dispute starts, it is too late. Wang Law PLLC drafts clear, enforceable contracts for Illinois businesses. Get a Quote Book Appointment