For those business owners who are too lazy to put their business arrangements in writing, the New York State Legislature has graciously created the Business Corporation Law, the Partnership Law, and the Limited Liability Company Law. Now, the Legislature doesn’t know you, it doesn’t know your business partners, and it certainly doesn’t know about your specific deals, agreements, or arrangements. And, it doesn’t care.
The best that the Legislature could do was to create a baseline designed to prevent chaos among inattentive business owners when things inevitably go wrong. However, with those general laws came a gift for engaged, active, and attentive business owners. Almost all of the governing laws can be changed by a written agreement among the owners to accommodate their particular wishes. So, a shareholders’, partnership, or operating agreement is essential for every business.
Those governance documents allow the owners to decide (a) how they will govern themselves, (b) how they will share profits and losses, (c) what their rights and obligations are to the business and to each other, and (d) perhaps most importantly, control their ability to transfer their equity in the business. Absent those foundational documents, the Legislature has made those decisions for you. I guarantee that, when your business hits the unavoidable “bump in the road”, you won’t like its choices.