Shareholder agreement builder

Template only - not legal advice. Shareholder agreements involve complex tradeoffs between founders and investors that vary significantly by company stage and negotiating position. Have a business attorney review this document before adoption, especially for companies with outside investors. See our full disclaimer.

1. Company information

Corporation name

State of incorporation

Agreement effective date

2. Shareholders

Shareholder name(s) and ownership percentage List one shareholder per line with their ownership percentage.

3. Transfer restrictions

Transfer restriction approach

Drag-along rights included?

Tag-along rights included?

4. Buy-sell provisions

Buyout triggering events (comma-separated)

Valuation method

Buyout payment terms

5. Governance and protections

Major decision voting threshold

Anti-dilution / preemptive rights?

Dispute resolution method

Your shareholder agreement

Get a business attorney review

A business attorney reviews your shareholder agreement to confirm it's consistent with your bylaws and Articles of Incorporation, and that valuation and buyout terms are fair and enforceable.

What's the difference between bylaws and a shareholder agreement?

Corporate bylaws establish the standard governance framework required by state law - how the board is elected, how meetings are conducted. A shareholder agreement is a separate, privately negotiated contract among the specific shareholders that addresses issues bylaws typically don't cover: transfer restrictions, buyout terms, drag-along and tag-along rights, and specific protections negotiated between particular founders and investors.

Both documents typically coexist - the bylaws handle standard corporate governance, while the shareholder agreement handles the specific deal terms negotiated among the actual owners. If you haven't yet adopted bylaws, start with the corporate bylaws generator first.

What are drag-along and tag-along rights, and why do they matter?

Drag-along rights allow majority shareholders (typically holding a specified threshold like 50% or two-thirds) to force minority shareholders to join in selling the company on the same terms, preventing a small minority shareholder from blocking a sale the majority wants to pursue. Without drag-along rights, a single holdout shareholder can derail an otherwise attractive acquisition.

Tag-along rights (also called co-sale rights) work in the opposite direction - protecting minority shareholders by giving them the right to join a majority shareholder's sale on the same terms, rather than being left behind as a minority owner in a company now controlled by a new, unknown buyer. Most sophisticated shareholder agreements include both provisions as a balanced protection for majority and minority holders alike.

Why does the buyout valuation method matter so much?

Disputes over business valuation are one of the most contentious and expensive aspects of shareholder disputes, particularly when a triggering event (departure, death, divorce) happens under difficult circumstances. Specifying the valuation method in advance - before any specific triggering event creates conflicting incentives about what number benefits which party - significantly reduces this risk.

Independent third-party appraisal is generally the fairest method but adds cost and time when triggered. A pre-agreed formula (like a multiple of trailing EBITDA) is faster and cheaper to apply but can become outdated or inappropriate as the business evolves. Many agreements use a formula as a default with a right to demand a full appraisal if any shareholder disputes the formula-based result. Our corporate bylaws generator and business entity selector cover related corporate governance documents.

Frequently asked questions

Generally, yes - a shareholder agreement is a contract, and it only binds the shareholders who actually sign it. If a company issues new shares to a new investor or employee after the agreement is signed, that new shareholder isn't bound by the existing agreement unless they separately sign a joinder agreement agreeing to be bound by its terms. Well-drafted shareholder agreements typically require this joinder as a condition of any future share issuance, ensuring the protections remain consistent as ownership evolves over time.

Without buy-sell provisions addressing this, the deceased shareholder's shares typically pass to their estate and eventually their heirs through the normal probate process - potentially making the deceased shareholder's spouse, children, or other heirs unexpected co-owners of the business, regardless of whether they have any interest or ability to participate in running it. A shareholder agreement with a death-triggered buyout provision (often funded by life insurance policies the company or shareholders maintain specifically for this purpose) avoids this outcome by ensuring the remaining shareholders can buy out the deceased shareholder's interest at a fair, pre-determined valuation.

Yes, many shareholder agreements include non-compete provisions for active shareholders (particularly founders), though enforceability follows the same state law reasonableness principles that apply to other non-competes. These provisions are especially important for shareholders who are also key employees or founders with intimate knowledge of the business, since their departure to a competing venture could be far more damaging than an ordinary employee's departure given their equity stake and insider knowledge.

A right of first refusal requires a shareholder who wants to sell their shares to a third party to first offer those shares to the company or existing shareholders on the same terms as the proposed outside sale. Only if the company and existing shareholders decline to purchase can the selling shareholder proceed with the outside sale. This mechanism keeps ownership within a known, trusted group of shareholders and prevents unwanted outside parties from becoming co-owners, though it can also make it harder for a shareholder to exit if existing shareholders lack the funds to exercise the right themselves.

Often yes, particularly for investors who hold a minority stake but want protection against decisions that could significantly dilute or disadvantage them - issuing new shares below a certain valuation, taking on significant new debt, or selling the company below a certain price. These "protective provisions" are standard in venture capital investment terms and give minority investors negotiated veto rights over a specific, limited list of major decisions without giving them general control over day-to-day operations, which remains with the majority or the board.