Owner agreements typically include business plans, management agreements, voting agreements, and transition plans. Partnership agreements typically involve many types of owner agreements. The owners of a limited liability company (referred to as managers) execute an operating agreement which contains many or all of the elements of the owner agreements executed separately in the corporate context.
The term business plan often refers to an operational plan – how the business (in the short term) intends to meet the goals set forth in a strategic (long-term) plan. The term business plan can also refer to both kinds of planning (strategic or long-term and operational or short-term). The owners of a business, reflecting upon their own values and goals, should communicate, decide, and document those decisions, thereby creating a plan setting forth the strategies to be followed by the business. The executives or managers of the business (who may also be all or part of the owners) should create an operating plan to accomplish the goals of the strategic plan. The operating plan will be impacted by any change in the strategic plan and should be immediately revised accordingly.
Owners will often agree that certain management issues will be dealt with in certain specified ways. These agreements should be in writing and separately executed by the owners if the writing is not a part of the business plan.
Voting agreements are authorized by state statutes of the state of the business entity organization. It is a legal contract among shareholders of a corporation relating to the voting of shares. The shareholder voting agreement often covers how members of the board of directors are to be elected and sometimes covers major corporate events such as mergers and acquisitions. Venture capital investors often expect a shareholder voting agreement to be executed in connection with their investment in a start-up company.
There are two essential types of transition plans, the contingency plan and the transition plan.
The contingency plan provides for the contingency of an owner's death or disability. From the business point of view, the focus of the contingency plan is short term. For example, if the CEO cannot function because of death or disability, what needs to be done? The immediate need is to know who will be performing the tasks of the CEO. When the identified contingency occurs, the reaction should be immediate and without question.
The transition plan addresses the transition of the business to its successors. This includes planning for a change in ownership, management, or management structure. Development of a transition plan involves personal, financial, family, business, and legal issues. Transition planning at a minimum involves identifying and then developing promising candidates for management positions, thereby maximizing the likelihood of a smooth and successful transition.
Owner agreements should be in writing and formally executed to prevent later disagreements.