Many co-owners will choose to operate the business through a limited company. The most significant benefit of forming a company is the benefit of limited liability. Generally, owners will not be personally liable for a company’s debts unless they provide creditors with personal guarantees or indemnities.
Nevertheless, company owners will need to discuss and agree with any co-investors what roles they will play in the management of the company – whether they will act as directors or be shareholders only.
It is advisable to have a shareholders’ agreement. Key issues include:
From a practical perspective, discussing the above issues at the outset of the venture is a useful exercise. Also, if any issues do arise, a shareholders’ agreement will be of great assistance in avoiding a costly and time-consuming dispute as it should provide a clear framework to resolve such disputes.
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