Article by Kristen Toppin 

If you've ever had to untangle a string of Christmas lights, you’ve got a small taste of what happens when a family business tries to handle estate and tax planning without a shareholder agreement. It can get chaotic fast. Luckily, there’s a tool designed to make things a whole lot smoother: the shareholder agreement.

Now, before your eyes glaze over, let’s break it down. A shareholder agreement is basically a written plan that says who owns what, what happens if someone wants out, and how big decisions get made. It’s like the instruction manual for running your family business, only way more useful than the one that came with your air fryer.

What does this have to do with estate and tax planning? A lot. When a family member passes away or wants to pass their shares down to the next generation, things can get complicated. Without a clear plan, you might have siblings arguing over who gets to be in charge, or someone ends up with ownership who doesn’t even want to be involved. A shareholder agreement helps keep the business on track and prevents surprises.

Let’s say Grandpa Joe owned 40% of the business and always said he wanted to leave it to his three kids. But then you find out the will just says “leave it to the family.” What does that mean exactly? Who decides? And how do you split shares three ways without creating a new math problem? A good shareholder agreement already has that figured out. It can say who gets what, whether shares can be split, and even whether someone has to work in the business to keep their shares.

Then there’s taxes. Fun, right? When shares are transferred after someone’s death, it can trigger big tax bills that catch families off guard. A shareholder agreement can be structured in a way that works with trusts, buy-sell clauses, or life insurance to cover those costs. That way, you’re not stuck selling off parts of the business just to pay Uncle Sam.

And don’t forget about preserving wealth for the future. You’ve worked hard to build something valuable. The last thing you want is for it to disappear because of poor planning or a family disagreement. A shareholder agreement can protect against forced sales, keep ownership in the family, and even limit who can buy shares if someone wants out. That helps make sure the business (and the legacy behind it) lasts for generations.

A shareholder agreement is less about legal jargon and more about making sure your family doesn’t have to choose between staying together and staying in business. It’s peace of mind in writing. And in the world of family business, that’s about as valuable as it gets.