Shareholder Employees

BusinessmanEmployees who are also shareholders navigate unique relationships, made complex by business history, politics, alliances, financial issue, personalities, and power struggles.  Employment contracts that are comprehensive, forward-thinking, specific, and well-planned are a key tool to protecting the personal investment of time, energy, know-how, and passion that a shareholder employee makes each day he or she is involved with the organization.   Often, employees who are also shareholders consider themselves invulnerable by virtue of their share ownership.  Unfortunately, too often we see employee-shareholders who have (in their excitement to become “partners”) entered into employment agreements that lack protection for the employee.  Sometimes, an employee-shareholder is “frozen out” by those who he or she used to consider friends and co-founders or business partners.   Too often, we see employee-shareholders who have taken on “investors” or “private equity” or “venture capital” partners who later maneuver to oust the shareholder-employee, enforce a non-competition agreement, and pay him or her far too little for his or her shares.   Sigman & Sigman, P.A. reviews, drafts and advises clients regarding their employment agreements in shareholder-employee arrangements.  A business lawyer is often also needed to address the deal from the shareholder agreement standpoint.  These two disciplines, coordinated carefully, may help avoid financial harm and help the employee-shareholder achieve the benefit of the bargain that he or she had hoped for.  Each individual circumstance is unique and requires an individualized approach, considering all the dynamics in play.