DON’T NEGLECT PREINCORPORATION AGREEMENTS WHEN COUNSELING CLIENTS ON FORMING NEW BUSINESSES

September 10, 2012

Preincorporation agreements can be invaluable tools in focusing the principals of a new business on the hard decisions that need to be made about governance of the new business and the roles that all of the key personnel will be playing in the operation and success of the venture.  These types of agreements include various contracts entered into by incorporators, promoters, subscribers and the principals (e.g., executive officers and directors) regarding the future organization of a corporation.  The agreements establish the ground rules for the organization, capitalization, and management of the proposed corporation.

This report provides an overview of the issues that should be considered by counsel and clients and also includes a sample of an agreement to incorporate as a Subschapter S (“pass-through taxation”) corporation. If you’re interested in further information review Business Transactions Solutions (BTS), a Westlaw database.