If you are in business with someone, whether it is in a company structure, a formal partnership, holders of units in a unit trust, or as a joint venture, it is crucial to ensure the legal relationship between the various interests is carefully defined and documented.
For majority interests (primary business owner or entrepreneur) it ensures that only the interest intended to be granted to minority interests is effective and enforceable. It reduces the risk of subsequent litigation which draws attention away from the operation of the business. From the point of view of a minority interest it ensures that the ownership interest they think they have is properly defined and enforceable.
It is healthy to negotiate an operating framework so the various interests know what to expect. When going into a venture it is always easier to come up with a framework by which disputes are resolved before any such difficulty arises.
A legal agreement should define what the equity interests are, what decisions in the venture must be unanimous or otherwise, what the obligation for making capital contribution will be, what the obligations for contributing to liabilities will be, how much income should be retained for working capital, dispute resolution mechanisms, insurance arrangements and many other issues.
Consult a lawyer to discuss today.