Corporations are one of the most common choices in terms of business structures in the United States. Most large companies in the United States are structured as corporations (e.g., Walmart), as they take advantage of their “full entity status.”
With full entity status, corporations have more power to expand their business activities while enjoying the benefits of limited liability. However, before structuring a company as a corporation in Florida, it is crucial to know everything about shareholder agreements.
In this article, you will discover all you need to know about the types of shareholder agreements in Florida.
What Is a Corporation?
A corporation is an independent legal entity structured for business. Consequently, the owners of a corporation are not liable for the business’s debts.
Another advantage of corporations is the ability to raise money selling stocks. When someone buys a number of stocks issued by a company, he/she can become a shareholder. In the business world, a shareholder is an individual/entity that owns part of a public company via stock shares.
What is the Purpose of a Business Shareholder Agreement?
In essence, a shareholder agreement is a document that outlines all regulations by which a corporation operates, the rights and obligations of all shareholders, and the relationship between the company and its shareholders.
This type of document is crucial for companies that involve more than a single individual investing in the business. Although it may share some similarities with partnership agreements, shareholder agreements must have a more detailed approach.
When the individuals founding a corporation reunite to draft a shareholder agreement, their purpose is to ensure shareholder protection, guaranteeing all shareholders are treated fairly.
Also, a corporate shareholder agreement establishes the parameters for prospective shareholders in the future, deciding whether or not someone can become a shareholder.
It is crucial noting that shareholder agreements provide minority shareholders a fair share of protection, as it obligates majority shareholders to protect minority stockholders against abuse and lack of participation.
Types of Shareholder Agreements in Florida – An Overview
Predominantly, there are two forms of shareholder agreement recognized by Florida law. First, there are “voting agreements,” which allow shareholders in a corporation to vote their shares in a specific way.
On the other hand, the second type of shareholder agreement permits shareholders in a corporation to override the default regulations imposed by the Florida Business Corporations Act.
Shareholder Agreements in Florida – Voting Agreement
Florida law provides about voting agreements in Section 607.0731 of the Florida Statutes. As provided by F.S. §607.0731 (1), “two or more shareholders may provide for the manner in which they will vote their shares by signing an agreement for that purpose.”
Plus, F.S. §607.0731 (2) provides that “a voting agreement created under this section is specifically enforceable.” For instance, it is possible to draft a voting shareholder agreement that permits the dissolution of a corporation after ten years.
Accordingly, all parties involved in the agreement should vote for dissolution after a decade. Also, voting agreements do not require unanimity from shareholders during voting.
Shareholder Agreements in Florida – Non-Default Agreement
Typically, owners of smaller corporations tend to prefer this type of shareholder agreement, which makes it much more common than voting agreements in Florida.
The Florida Business Corporations Act (F.S. Chapter 607) has an extensive list of provisions on how to establish and run a corporation in the Sunshine State. The second type of shareholder agreement permits shareholders to set aside the default parameters imposed by the Act.
Nevertheless, it is crucial to note that shareholders who opt for this type of agreement have limitations to revoke its provision, if necessary.
Draft the Ideal Shareholder Agreement for Your Corporation in Florida – Work with Jurado and Farshchian, P.L.
Undoubtedly, shareholder agreements are complex, which requires a strategic approach. Talk to Attorney Romy B. Jurado today at (305) 921-0976 or send an email at Romy@juradolawfirm.com to schedule a consultation.