Some common issues to consider when drafting Shareholders Agreement, Joint Venture Agreement, Bylaws, LLC Operating Agreement, or Partnership Agreement:
I. MEMBERS
Membership Classes and Responsibilities.
Will there be different classes of
members? (voting vs. nonvoting, active vs. passive).
Minimum amount of time contributed by each member?
Will some members have the authority to act freely within
their assigned fields or responsibility, without the need to seek approval of
other members?
What happens if one of the members is not pulling their weight?
Are members allowed to participate in outside business
activities that might be in competition with the company business?
How can the new members be admitted?
How can the new members be admitted?
Management. Member managed or manager managed? What would it take to remove a manager?
Indemnification. Disclaim member liability to the fullest extent
allowable by state law or not? Procedures for
indemnification, attorney fees authorized?

II. CAPITAL
CONTRIBUTIONS; PROFITS AND LOSSES
Capital Contributions.
Required
initial contribution of each member? Will the members be required to contribute
additional capital to the company after their initial capital contribution? How will sweat equity, IP and in-kind contribution be valued? (It is taxable income to receive a capital interest in exchange for services in an LLC that is taxable as a partnership. So, the higher you valuate the sweat equity the more tax liability you’ll incur. One way to deal with this would be to contribute a nominal amount of cash initially and loan money to the LLC, with interest, by executing promissory note(s) with any or all members. This way everybody would retain their respective percentage ownership and the LLC will be adequately funded without the extra tax burden.)
Profits and Losses. Will profits
and losses be allocated on the basis of ownership percentages? The amounts of any
regular drawings against profits. Will any of the members receive a priority
return over other members (e.g. when one member contributes money and the other just "ideas" that might not even play out)?
III. MEETINGS
IV. TRANSFER OF INTEREST
Sale of Interest.
Company’s right of first refusal before a member can sell the
interest to third parties?
Can the company purchase a member’s
interest upon their death?
Will it be funded with life
insurance?
How will the event of protracted disability of a member be
handled? Period of time in which a former member may not engage in a competing
business.
business.
Penalty for early withdrawal from business (e.g. lower
share valuation if leaves the company within the first year or two)?
Buyout. In what circumstances members
force a member to sell interest and at what price? More on buyout agreements and methods of valuation here.
V. DISSOLUTION
Will any specific events be deemed liquidating
events?
Priorities for distribution.
Priorities for distribution.
VI. MISCELLANEOUS
Tax classification
Entire Agreement
Procedure for amendments
Governing law
Dispute resolution
Successors and assigns