Setting up 50/50 company; avoiding deadlocks

**Cormega** · 12-07-2010 04:07 PM

Hi everyone, I'm setting up a new corporation with a partner. Initially, I suggested a 50/50 shares arrangement, but my partner was concerned about the potential for deadlocks. An option that we are exploring is having 48% each, and a third shareholder that would own 4% and act as a swing vote.

Any suggestions? Is it possible to maintain do 50% each, and simply have a provision in the shareholders agreement that we will take specific steps to resolve deadlocks?

**jshaw185** · 01-17-2011 02:56 PM

51 49 is prob ur best bet

**Austy** · 01-30-2011 12:07 PM

If it is a corporation you are creating and not some other type of entity there are plenty of things you can do. I would split the shares 49/49/2% and stipulate in the by-laws that if majority rule does not vote otherwise all directors are re-elected. If you do that, you can have a third person as a non-executive director and that prevents ties at the director level.

**rogercbryan** · 01-31-2011 08:36 AM

If you and your partner are worried about deadlocks before you even get started you are heading in the worrisome direction. It is good that you are thinking about this but the way you've outlined your concerns in this post makes me a little nervous. A two person partnership isn't that hard to manage. I would make sure you both feel confident that you can work out any issues easily before you move forward.

There are ways to handle this in your Articles of Incorporation. You would simply want to outline the terms of non legal arbitration. Meaning arbitration with out the use of the courts for deadlocked situations. This is a very simple way to outline a course of action in a deadlock situation.

There are people on this forum that can tell you exactly how to do this. Hopefully Akula will pick up on this thread.

*I'm not a lawyer and this is not legal advice