Share this Page URL

Chapter 2. First Steps > Issuing Ownership Stakes - Pg. 36

First Steps 36 Issuing Ownership Stakes Once you have decided on an entity type and the allocations of ownership, profits, and control among founders, the next step is to issue the ownership stakes. In an LLC, the ownership unit is a membership interest owned by members, with one or more managing members who are most active in the management of the LLC. A partnership has partners who own partnership interests . A limited partnership will have limited partners who enjoy limited liability but little control and general partners who enjoy control but full liability for the partnership's debts. A corporation is owned by shareholders who own stock. Ownership of a corporation can bring other complexities, which will be covered in this section. While the terms describing what it is one "owns" are different for each entity, they share many of the same legal issues and trouble spots that need to be addressed. Owners should have a written agreement in place laying down the owners' expectation in a number of areas: control; how own- ership will be affected by certain events such as death, departure, and addition of new owners; and what to do when an owner wishes to sell. The "Ownership Agreements" section of this chapter covers the main scenarios and points to consider. This section will explain: · The form and special considerations of ownership in a corporation. · Recommended provisions in ownership agreements. Ownership of a Corporation: Equity This section addresses issuing ownership in corporations, which will provide a good framework for understanding concerns of sharing ownership no matter what your entity type. Ownership comes