Most business disputes between co-owners don’t start with bad intentions. They start with misaligned expectations — assumptions that were never put in writing, roles that were never clearly defined, and exit scenarios that no one planned for. By the time the disagreement surfaces, the damage to the business is already underway.
That’s why the right agreement matters from day one. Whether your business is structured as a partnership, corporation, or LLC, a well-drafted agreement sets clear expectations around ownership, decision-making, profit distribution, and what happens when things change. Without one, you’re relying on Michigan’s default statutes — and those rarely reflect what the owners actually intended.
At SBS Law PLC, we don’t just draft these agreements — we litigate the disputes that arise when they’re missing or poorly written. That experience gives us a perspective most drafting attorneys don’t have. We’ve seen firsthand how vague buyout language, undefined voting rights, and missing exit provisions tear businesses apart. We use that insight to build agreements that hold up under pressure.
If your Grand Rapids business needs a partnership agreement, shareholder agreement, or LLC operating agreement — or if a co-owner dispute is already brewing — contact us today to schedule a consultation. We serve businesses in Grand Rapids, Kalamazoo, and throughout Michigan.
Why Every Co-Owned Business Needs a Written Agreement
When two or more people own a business together, disagreements are inevitable. Markets shift, priorities change, and what made sense at the start may not hold up two or five years in. The question isn’t whether conflicts will come up — it’s whether you have a clear, enforceable agreement in place to resolve them before they threaten the business.
The type of agreement your business needs depends on how it’s structured:
- Partnership agreements govern general and limited partnerships. They define each partner’s role, capital contributions, profit-sharing, and what happens if a partner wants out or can no longer serve.
- Shareholder agreements apply to corporations with multiple owners. They establish voting rights, share transfer restrictions, buy-sell provisions, and procedures for resolving deadlocks between shareholders.
- LLC operating agreements serve the same essential function for limited liability companies. They outline each member’s ownership interest, management authority, distribution rights, and exit procedures. In Michigan, an LLC without an operating agreement defaults to statutory rules that may not reflect how the members actually intended to run the business.
Each of these agreements serves a different entity type, but they all solve the same fundamental problem: they replace assumptions with clearly defined terms. Without one, co-owners are left to argue over what they thought the deal was — and those arguments often end up in litigation.
What Should an LLC Operating Agreement Cover?
Limited liability companies are the most common business structure for small and mid-sized businesses in Michigan — and yet a surprising number of them operate without a written operating agreement. That’s a problem. Under the Michigan Limited Liability Company Act, an LLC without an operating agreement defaults to statutory provisions that may have nothing to do with how the members actually intended to run the business. Worse, when a dispute arises between members, there’s no document to point to — just competing versions of what everyone thought the deal was.
We’ve represented LLC members on both sides of these disputes, and the pattern is almost always the same: the members started the business with a shared vision but never defined the details. Then circumstances changed — someone wanted out, profits weren’t distributed the way one member expected, or a disagreement over direction turned personal. Without an operating agreement, there’s no roadmap for resolving any of it.
These are the provisions every LLC operating agreement should address:
- Membership interests and ownership percentages. Who owns what, and how was that determined? Capital contributions, sweat equity, and intellectual property all factor in — and all need to be documented clearly.
- Profit and loss distributions. Members don’t always split distributions equally, and the timing of distributions matters just as much as the percentages. Ambiguity here is one of the fastest paths to a membership dispute.
- Management structure. Is the LLC member-managed or manager-managed? Who has authority to sign contracts, hire employees, or make financial commitments on behalf of the company? When these lines are blurry, members end up making conflicting decisions — or no decisions at all.
- Voting rights and major decisions. Day-to-day operations might rest with one or two members, but major decisions — taking on debt, selling assets, admitting new members — should require defined approval thresholds.
- Transfer restrictions. What happens if a member wants to sell their interest? Can they bring in an outside buyer, or do existing members get a right of first refusal? Without transfer restrictions, you could end up in business with someone you never agreed to work with.
- Buyout and exit provisions. Members leave for all kinds of reasons — retirement, disagreements, new opportunities. The operating agreement needs to define how a departing member’s interest is valued, how and when they get paid, and what restrictions apply.
- Dispute resolution. A mandatory mediation or arbitration clause can save the business from the cost and disruption of full-blown litigation. It also forces members to address problems early instead of letting them escalate.
- Death, disability, and involuntary events. If a member dies, becomes incapacitated, or faces personal bankruptcy, the agreement should dictate what happens to their interest. Without these provisions, the business can be thrown into legal limbo at the worst possible time.
- Dissolution procedures. If the members decide to wind down the business, the agreement should spell out how assets are distributed, debts are settled, and the company is formally dissolved.
If your LLC doesn’t have an operating agreement — or if the one you have was pulled from a template and never customized — your business is exposed. The cost of putting the right agreement in place is a fraction of what it costs to litigate a membership dispute after the fact.
What Should a Shareholder Agreement Address?
If your business is structured as a corporation with two or more shareholders, your bylaws alone aren’t enough to protect you. Bylaws govern general corporate procedures — how meetings are held, how officers are appointed, how records are kept. But they don’t address the issues that actually cause shareholder disputes: who can sell their shares and to whom, what happens when shareholders can’t agree on a major decision, and how a departing owner gets bought out.
That’s what a shareholder agreement is for. Under the Michigan Business Corporation Act, corporations have broad flexibility to define the rights and obligations of their shareholders through private agreement. But if you don’t use that flexibility, you’re left with statutory defaults and bylaws that weren’t designed to resolve the kinds of conflicts that tear closely held corporations apart.
From our experience litigating shareholder disputes, these are the provisions that matter most:
- Share transfer restrictions. Without these, a shareholder can sell their interest to anyone — including a competitor, a disgruntled former employee, or a complete stranger. Transfer restrictions keep control of the business where the shareholders intended it to stay.
- Voting rights and decision-making thresholds. Routine operations might be handled by officers or a board, but major decisions — selling the company, taking on significant debt, entering new markets — should require shareholder approval at clearly defined thresholds.
- Buy-sell provisions. These are the backbone of any shareholder agreement. They define the triggering events — voluntary departure, termination, retirement, death — and establish the process for buying out a shareholder’s interest. Without them, a single exit can throw the entire corporation into uncertainty.
- Valuation methods. How is a shareholder’s interest worth determined in a buyout? Fair market value? Book value? A formula? Disputes over valuation are some of the most expensive fights in shareholder litigation because without an agreed-upon method, each side hires their own expert and the numbers rarely line up.
- Deadlock provisions. When shareholders with equal voting power can’t agree, the business grinds to a halt. A well-drafted agreement includes a mechanism for breaking deadlocks — whether through mediation, a swing vote procedure, or a forced buyout.
- Rights of first refusal. Before any shareholder sells to an outside party, existing shareholders should have the right to purchase those shares first. This protects the ownership group from unwanted outside influence.
- Issuance of new shares. Issuing new shares can dilute existing shareholders’ ownership and voting power. The agreement should define when and how new shares can be issued and whether existing shareholders have anti-dilution protections.
- Death, incapacity, and involuntary events. Just like with LLCs, a shareholder’s death or incapacity can create legal and operational chaos if the agreement doesn’t address it. These provisions ensure the business can continue operating without interruption.
Closely held corporations are especially vulnerable to shareholder disputes because the owners are often deeply involved in daily operations. When relationships break down, there’s no public market to sell into and no easy exit. A strong shareholder agreement doesn’t just prevent disputes — it provides the off-ramp when they can’t be avoided.
Protecting Minority Shareholders and LLC Members from Oppression
If you hold a minority ownership interest in a corporation or LLC, you may have limited voting power — but that doesn’t mean you’re without rights. Under Michigan law, majority shareholders and controlling LLC members have a duty not to act in ways that are oppressive, fraudulent, or unfairly prejudicial to minority owners. When they do, the minority owner has legal options.
Minority oppression can take many forms, and it doesn’t always look like an obvious power grab. In our experience litigating these disputes, the most common patterns include:
- Freezing a minority owner out of management decisions they were previously involved in or had a reasonable expectation of participating in.
- Cutting off distributions or compensation to a minority owner while majority owners continue to pay themselves through salaries, bonuses, or other arrangements.
- Diluting a minority owner’s interest by issuing new shares or membership interests without proper notice, consent, or a legitimate business purpose.
- Withholding financial information or denying access to company books and records that the minority owner is legally entitled to review.
- Using company resources for personal benefit while excluding minority owners from the same opportunities.
- Forcing a minority owner out on unfavorable terms — or making conditions so intolerable that they feel they have no choice but to leave at a discount.
Michigan courts take these claims seriously. Depending on the circumstances, available remedies can include a court-ordered buyout at fair value, an injunction to stop the oppressive conduct, dissolution of the entity, appointment of a receiver, or an award of damages. The specific remedy depends on the facts, but the principle is the same: majority control doesn’t mean unchecked power.
The best protection, of course, is a well-drafted agreement that addresses these risks before they materialize. Strong anti-oppression provisions, guaranteed access to financial records, distribution floors, and clearly defined approval thresholds for major decisions can all help prevent a majority owner from squeezing out the minority. That’s where our litigation experience becomes a drafting advantage — we build these protections into agreements because we’ve seen what happens when they’re missing.
If you’re a minority shareholder or LLC member and you believe your rights are being violated, don’t wait. These situations tend to escalate, and early legal intervention can make the difference between preserving your investment and losing it.
What Should a Partnership Agreement Cover?
Partnerships carry a unique risk that LLCs and corporations don’t: in a general partnership, each partner can be held personally liable for the debts and obligations of the business — including decisions made by the other partners. That alone makes a written partnership agreement essential. But under the Michigan Revised Uniform Partnership Act, if you don’t have one, your partnership defaults to statutory rules that treat every partner equally regardless of what they contributed, what they were promised, or what role they actually play.
That might sound fair on paper. In practice, it’s a recipe for conflict. We’ve litigated partnership disputes where one partner funded the entire operation while the other contributed labor — and without a written agreement defining their respective interests, the statute treated them as equal owners. That kind of outcome is avoidable, but only if the terms are locked down in writing before a disagreement forces the issue.
Here are the provisions every partnership agreement should address:
- Capital contributions and ownership percentages. Who invested what — cash, property, equipment, expertise — and what ownership stake does that entitle them to? When this isn’t documented, disputes over who owns what can consume the partnership.
- Profit and loss distribution. Partners don’t always share profits equally, and they shouldn’t have to. The agreement should define exactly how distributions work — including timing, reinvestment expectations, and how losses are allocated.
- Management authority and voting rights. Who runs the day-to-day operations? Who has authority to bind the partnership to contracts or financial commitments? In a general partnership, any partner can create obligations that the others are personally liable for. That’s a serious exposure if decision-making authority isn’t clearly defined.
- Roles and responsibilities. Especially in partnerships where one person handles operations and another handles finances or business development, each partner’s role needs to be defined — along with the consequences if they don’t hold up their end.
- Dispute resolution procedures. Mediation or arbitration clauses give partners a structured way to work through disagreements without immediately resorting to litigation. They also signal to both sides that disputes are a normal part of business — not a reason to blow up the relationship.
- Admitting new partners. Bringing in a new partner changes the economics and dynamics of the entire business. The agreement should define the approval process, the new partner’s capital requirements, and how existing ownership interests are affected.
- Buyout and exit provisions. When a partner wants to leave — or needs to be removed — the agreement should define how their interest is valued, the payout structure, and any non-compete or non-solicitation obligations that apply after departure.
- Death, disability, and bankruptcy. A partner’s death or incapacity doesn’t automatically dissolve the partnership, but it can create chaos without clear succession or buyout language. The same applies if a partner faces personal bankruptcy — the agreement needs to address how that affects their interest in the business.
This is especially critical for family-run partnerships and businesses built on personal relationships. Those are the partnerships where people are most likely to skip the paperwork — and in our experience, they’re the ones most likely to end up in litigation when expectations don’t align.
When Should You Update Your Agreement?
The agreement you signed when the business started may have made perfect sense at the time. But businesses evolve — ownership changes, revenue grows, new members or shareholders come in, key people leave. If your partnership agreement, shareholder agreement, or LLC operating agreement hasn’t kept pace with those changes, it’s not protecting you anymore. It’s a liability.
Here are some of the most common triggers that signal it’s time to review and update your agreement:
- A new owner, member, or shareholder joins the business. The agreement needs to reflect their ownership interest, rights, and responsibilities — and existing owners need to know how their stakes are affected.
- An owner departs, retires, or is removed. If the buyout just happened on a handshake or the agreement’s exit provisions don’t match what actually took place, you’ve created a gap that can be exploited later.
- The business has grown significantly. An agreement drafted when the company had $200,000 in revenue may not hold up when the business is doing $2 million. Valuation methods, distribution structures, and decision-making authority often need to scale with the business.
- The ownership structure has shifted. Unequal contributions over time — whether financial or operational — can create resentment if the agreement still reflects the original split. Updating the terms to match reality prevents that tension from boiling over.
- There’s been a change in Michigan law. Statutes governing LLCs, corporations, and partnerships are updated periodically. An agreement that was compliant five years ago may have provisions that are now unenforceable or missing protections that current law allows.
- A dispute has already surfaced. If co-owners are disagreeing about money, management, or direction, the first thing to look at is the agreement. If it’s silent on the issue — or if the language is vague enough that both sides think they’re right — it’s time for a revision.
At SBS Law PLC, we regularly help businesses in Grand Rapids and throughout Michigan review, revise, and strengthen their existing agreements. Sometimes that means targeted updates to a few key provisions. Other times it means starting over with a new agreement that reflects where the business is today. Either way, we’ll make sure the document holds up — because we know from experience what happens when it doesn’t.
Why Work with SBS Law PLC on Your Business Agreement?
There’s no shortage of template operating agreements, partnership agreements, and shareholder agreements available online. Some business owners use them thinking they’ve checked the box. But a template doesn’t know your business. It doesn’t account for your ownership dynamics, your industry, your growth plans, or the specific risks your co-owners might face down the road. We’ve litigated disputes where the agreement on file was a downloaded template that nobody customized — and when the conflict arose, it was essentially useless.
At SBS Law PLC, we draft these agreements differently because we’ve seen how they fail. Our attorneys have represented business owners in partnership disputes, shareholder litigation, and LLC membership disputes across Grand Rapids and throughout Michigan. That courtroom experience shapes every agreement we write. We don’t just include standard provisions — we stress-test them against the real-world scenarios we’ve seen play out in litigation.
Here’s what that looks like in practice:
- We start by understanding your business. Not just the entity type, but the relationships, the financial dynamics, and the long-term vision of each owner. That context drives every drafting decision.
- We draft with disputes in mind. Every provision is written to hold up under pressure — clear enough that both sides know what it means, specific enough that a court can enforce it, and thorough enough that it doesn’t leave gaps for future disagreements to exploit.
- We address the hard conversations early. Buyouts, death, disability, removal, valuation — these aren’t comfortable topics, but they’re the ones that cause the most damage when they’re left undefined. We help co-owners work through these issues during drafting, so they don’t become litigation later.
- We coordinate across documents. An operating agreement, shareholder agreement, or partnership agreement doesn’t exist in a vacuum. We make sure it aligns with your bylaws, articles of organization, any existing buy-sell agreements, and Michigan statutory requirements.
- We build agreements that grow with you. Your business today won’t look the same in five years. We draft with that in mind and build in mechanisms for updates, amendments, and evolving ownership structures.
The difference between a document that sits in a drawer and one that actually protects your business comes down to who drafted it and what they’ve seen go wrong. That’s the advantage our clients get.
Contact Our Grand Rapids Business Agreement Attorneys Today
Whether you’re forming a new business with co-owners, operating without a written agreement, or already dealing with a dispute between partners, shareholders, or LLC members — the attorneys at SBS Law PLC can help you protect your interests and move forward with clarity.
Our Grand Rapids business law attorneys work with small and mid-sized companies across Michigan to draft, review, and update the agreements that hold co-owned businesses together. From LLC operating agreements and shareholder agreements to partnership agreements and buy-sell provisions, we build documents that are tailored to your business, grounded in Michigan law, and stress-tested against the disputes we’ve seen play out in litigation.
We also represent minority shareholders and LLC members facing oppression, co-owners locked in management or financial disputes, and business owners navigating buyouts, exits, and ownership transitions. If the relationship between co-owners has broken down, we can evaluate your legal options and help you pursue the best possible outcome.
Here’s what you can expect when you reach out:
- An initial consultation with an experienced business agreement attorney in Grand Rapids
- An honest assessment of your current agreement — or your exposure if you don’t have one
- A clear recommendation on whether you need a new agreement, an update to an existing one, or legal action to protect your ownership rights
Don’t wait for a dispute to expose the gaps in your business agreement. Contact SBS Law PLC today to speak with a Michigan business law attorney who understands how these agreements work — and what happens when they don’t.
