What is it?
"Owners' Agreement" is a general term that can refer to any document that addresses issues like owners' rights, compensation systems, succession planning, management roles, and shareholder disputes. Owners' agreements include partnership agreements, shareholder agreements, buy-sell agreements, operating agreements, stock option agreements, or joint venture agreements. They're usually written and adopted when a business is formed, but can be created at any point during the company's life cycle.
Who needs them?
You want the lawyer answer? Everyone. You want the businessperson's answer? Everyone. See what I did there? Even you single-member LLCs should have some sort of owner's agreement to address who takes over when you're incapacitated or worse. In short, if someone - anyone, you included - has a stake in your company, you need an owner's agreement.
Why, oh why, do we need another contract?
Why? To protect the blood, sweat and tears that you have poured into your business from the day you got your license in the mail, all foil embossed and official-like.
Here's a scenario: You and your best friend from college decide to start a business. You've survived the yearlong silent treatment after you objected (during the ceremony, no less) to your friend marrying that awful person who continues to say wildly inappropriate things to your spouse at every party. Your friend, heaven forbid, dies in a freak roller coaster accident. Without an owner's agreement transferring your friend's interest in the business to you, you now own the business with your friend's horrible spouse.
Here's another scenario. Your friend, whom you trust with your life, tells you about this guy who's a brilliant businessman, who has made millions, and who should totally be on board with your business. You don't know this guy from Adam, but you trust your friend implicitly. You agree to make the guy your CFO and six months into the business, he waltzes into the bank and, as the only signer on the account, empties it and disappears.
Unfortunately, these situations are all too common and so easily avoided with a well-written owner's agreement. These documents are really pretty handy - they can head off litigation by creating a method to settle disputes among shareholders, they can protect intellectual property from being poached by someone leaving the company, they can determine how voting rights are distributed, they can relieve pressure on the business owners by delegating leadership roles and defining management responsibilities, and they can even set forth non-competition clauses.
I have only one request: Please, please, PLEASE don't use an owners' agreement downloaded from the internet. Pretty please? With sugar on top? These are either written so generally they don't provide much in the way of protection or they were written for a specific business that may bear absolutely no resemblance to your company and therefore are a waste of paper. Owners' agreements are so important and can do so much to protect your business, they're worth doing properly.
Also keep in mind these are living documents that should be reviewed and revised if necessary at the annual meeting. Especially in the first few years of operation, a business can undergo drastic changes. The owners' agreement should be revised and adopted as these changes happen. Don't just file it in your corporate binder and forget about it.
Find a business lawyer who's willing to learn about your business, explore all the protections an owners' agreement can provide your particular company in its own set of unique circumstances, and meet with you annually (or more often) to revisit the agreement.
Like the A-1 commercial says: Yeah, it's that important.