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USAs and Corporate Law: Letting Friends Stay Friends

In the corporate world, a “USA” is not necessarily our trading partner to the south but more commonly a Unanimous Shareholders Agreement that can help friends stay friends. It makes clear what happens when family members join the business, clarifies what happens when one of the shareholders dies and much, much more. Even best friends that create a business concept over a couple of beers, bring the concept closer to reality at a BBQ, dip into their savings to start the company and jointly share obligations at the bank to create the operating line, often find that time changes everything.

A USA identifies the shareholders, their respective interests, who will be directors, which directors’ powers are controlled by shareholders, what offices people hold, how shareholders can take money out of the company, what happens if someone wants to sell their shares, what happens if people die, and so on. While we are great advocates of trust and a handshake, there is no substitute for the written word, especially when a child or spouse of a deceased shareholder shows up with proxies in hand and wants to take control of your company.

One of the most important elements of a USA is that it clearly sets out various rights and obligations so that these elements don’t get in the way of the friendship at a later date. You really don’t want your family inheriting a fight with your business partner and you also don’t want to have your business on the block in a divorce settlement. Taking care of your personal business makes good business sense. Treat it that way.

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