Should we draw up an ownership agreement?

If several self-employed people or entrepreneurs start up a business together, it is a very good idea to draw up an ownership agreement. IDA will guide you through the key aspects below.

In peace, prepare for war, as the old saying goes, and this is highly relevant when several people start a business together. Rights, terms of confidentiality as well as non-solicitation and non-competition clauses are some of the aspects that can be defined in an ownership agreement. And these ground rules are essential, whether you have a limited liability company (ApS or A/S) or a limited partnership company (P/S).

In short, an ownership agreement is an agreement that describes the terms and conditions for your collaboration and ownership of the business. IDA has an agreement with the Legal Desk online service, which offers IDA members a 20% discount on all business services, including an ownership agreement template.

There is more information about Legal Desk and an ownership agreement template here.

Initial contributions, work commitments and shares

Most importantly, an ownership agreement should include information about the initial contribution made by each individual owner. Contributions include capital, tools and equipment or agreements with customers. It's a good idea for the owners to agree whether they commit themselves to contributing additional capital, and whether they will act as guarantors for the company's financial commitments. The ownership agreement should also describe the owners' work commitments and roles in the company. The expected work commitment from each individual owner as well as the rights of the individual owner must be defined.

Furthermore, it's essential that the ownership agreement defines what the owners can do with their ownership shares. You have to decide whether the owners should be allowed to mortgage their ownership shares, and if so, what rules apply to such mortgaging. And speaking of shares, another crucial aspect is to value your shares. You may need this valuation if one owner wants to sell his or her shares to another owner.

Selling the business

You should consider whether to impose a (possibly temporary) ban on selling shares, so that none of you is allowed to sell shares in the company to a competitor, for example, or to another party who may be undesirable for the remaining owners. Further to this, one of the most important aspects of an ownership agreement is non-solicitation and non-competition clauses. Make sure that you can leave the company, and that the other owners do not have a purchase obligation.

Note that IDA's legal advisors are available to review your ownership agreement and provide legal counselling when you start up a business. Send your ownership agreement to IDA's lawyers via My IDA