When two or more people own a business together, the most important document they can have is one that defines what happens when they disagree. A shareholder agreement — sometimes called a stockholders’ agreement — does exactly that. It governs the relationship between the owners of a corporation, addressing how decisions are made, what rights each shareholder has, and how ownership can be transferred when circumstances change.

One of the most valuable functions of a shareholder agreement is what is sometimes called a buy-sell provision. This is the mechanism that determines what happens to a shareholder’s ownership interest if they want to leave the business, if they pass away, if they become incapacitated, or if they simply can no longer work alongside the other owners. Without a buy-sell structure in place, a departing owner’s shares could end up in the hands of their estate, their former spouse after a divorce, or a third party the remaining owners never agreed to go into business with. A properly drafted buy-sell provision gives the business — and the remaining owners — a clear, pre-agreed path forward.

Shareholder agreements also address voting rights, dividend policies, restrictions on the transfer of shares, and what happens in the event the company is sold. These are not conversations most business partners want to have when things are going well — which is precisely when they should have them. Negotiating the terms of a business divorce is far easier before anyone is angry, before a deal is on the table, and before a dispute has made every conversation adversarial. If you have a business partner and you do not have a shareholder agreement, that is a gap worth addressing now.