Businesses are initially organized to reflect the current operational and ownership structure of the business. Once a business grows, expands and starts becoming successful, the business owners will likely elect to address the business reorganization. Business reorganization often occurs when the business owners engage in a capital raising event, a new member is added to the limited liability company, a new board member is elected in a corporation, partners are added or terminated from the partnership, or new shareholders would like to invest in the company. Business reorganization may also be used as a way to incentivize key employees to stay with the company as an alternative to paying a salary.
In all of these business reorganization situations, the need to reorganize, draft, and/or negotiate agreements between owners, members, shareholders, and partners, is essential. Moreover, structural changes in the businesses operations also require reorganization and redrafting of written agreements that outline the business’s new structure.