Business Contract Lawyer for Unanimous Shareholders Agreements and Partnership Agreements.

Shareholders Agreement vs. Partnership Agreement

Contact Neufeld Legal PC at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com

As a corporate business lawyer asked to review, draft and deal with the legalities of both unanimous shareholders agreements and partnership agreements, the distinction is all too often initially lost amongst my clients, such that it is worthwhile to identify the key differences.

A shareholders agreement pertains to the arrangement between shareholders as to how they operate and manage the business of a corporation, being specific to that corporation and its functionality. Conversely, a partnership agreement pertains to the arrangement between business partners as to how those partners engage in business together, with such business not being subject to the imposition of a corporate entity through which management and operations of the business are undertaken and confined.

This ties into a further distinction as between corporations and partnerships, which is reflected in the documentation, with a corporation being a distinct legal entity and a partnership being a composite of the partners, who share joint and several liability for the partnership’s activities (subject to certain legislative distinctions for limited partnerships and limited liability partnerships).

Although in both cases, corporations might be involved, either as shareholders and/or participants in the business activities, it is only with a shareholders agreement that the management and operation of the particular business is undertaken within the structure of a corporation, being an entity distinct and distinguishable from its shareholders.

Furthermore, corporations and partnerships are subject to their own specific legislation and case law, as to their formation, operation and dissolution. A corporation must be registered and formed pursuant to the legislation of the governing jurisdiction, whereas a general partnership can come into existence without any formal government registration.

As the product of a government statute, corporations tend to have considerably more structure imposed upon their existence and operation from the legislation, which exists even in the absence of a written agreement between the participants, such that a shareholders agreement serves to modify and amplify the legislated arrangement, while a partnership tends to be largely devoid of any legislated arrangement, such that in the absence of a partnership agreement, the partners must rely upon legal interpretations from common law and court precedent, making a partnership agreement particularly important.

Yet, in both circumstances, it is always advisable to have a formal written agreement drafted as to the rights and responsibilities of the parties to the business, together with its management and operation, be it a unanimous shareholders agreement for a corporation or a partnership agreement for a partnership. When engaging in business with other individuals, whether through a corporation or a partnership, the value of an appropriate unanimous shareholders agreement or partnership agreement, as the case may be, to legally protect one’s interests therein, cannot be understated.

Conversely, when contracts are poorly negotiated and/or written, they can become a source of unending anguish and drain on a business' financial resources. Experienced contract negotiations and drafting will enable you to avoid these disasters, by avoiding the traps and pitfalls that other businesses all too frequently fall prey to. You should always be looking to solidify your business relationships with well-structured contracts, so that you can focus on your core business and not the distractions that arise from disputes that lack a clear contractual formula for resolution.

For experienced legal representation with respect to unanimous shareholders agreements, partnership agreements and other business contracts, contact Neufeld Legal P.C. at Chris@NeufeldLegal.com or 403-400-4092 / 905-616-8864.


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