Structure - Control Your Cap Table

The fact that you are reading this means that you are an entrepreneur, business owner, or planning to become one. You are our heroes and we applaud you for taking on this journey and challenge. One of the most important things that you can do in starting a business is properly being able to control your cap table. And controlling your cap table will enable you to have a business that can grow and scale.

What is a Cap Table

So first off, a cap table is the list of owners of equity in your business and how much equity you have reserved to sell or grant in the future to additional owners, including employees or investors. Here’s a visual example of what a cap table looks like:

How to Control Your Cap Table

What does it mean to “control” your cap table? With an Operating or Shareholder Agreement, there are two different philosophies that are in tension in each. On one hand, you can err on the side of protecting the company, and on the other, you can err on the side of protecting the owners.

I often see owners make the mistake of erring on the side of protecting the owners in a way that lays roadblocks in front of the business when it tries to grow and scale. Anti-dilution clauses and requiring unanimous consent from owners to authorize and issue new equity are the most common ways people stumble when trying to grow a business. In my professional opinion, I would trade an anti-dilution provision for preemptive rights, and unanimous approval for supermajority consent and good faith requirements.

What to Include in Your Operating Agreement or Shareholder Agreement

Now that you have a business that you want to scale, and you want the company to control the cap table instead of having an owner-controlled cap table, what’s next? Here are 5 items that you should consider when preparing your Operating or Shareholder Agreement:

  1. Pick the right equity splits and use vesting even for founders
  2. Include Buy-Sell provisions
  3. Rights of First Refusal
  4. For-Cause Repurchase Rights
  5. Drag-Along Rights

Provisions to Avoid in Your Operating Agreement or Shareholder Agreement

Not only are there some provisions you should include in the Operating Agreement of Shareholder Agreement, but there are some you should avoid. Here are 2 provisions (that we briefly mentioned previously) you should keep out and not allow in your Operating Agreement or Shareholder Agreement:

  1. Anti-Dilution
  2. Unanimous Consent

What to Include

Equity Splits and Vesting

With the right provisions in your Operating Agreement or Shareholders Agreement, you need to consider how to split and allocate the company’s equity. When determining how much equity to give co-founders, employees, or other owners, you should take into consideration a number of factors:

  1. The potential value of the idea and concept of the business;
  2. The value or actual cash and property contributed by the owners; and
  3. The value over time for relationship and service values to be provided.

One thing to remember is that the equity associated with items 1 and 2 should be fully vested, but any value attributed to item 3 should be protected and incentivized to be earned through vesting provisions.

Buy-Sell Provisions

Buy-sell provisions typically give the company a repurchase right if equity ownership changes hands due to one of the following events:

  1. Death
  2. Disability
  3. Divorce
  4. Bankruptcy

A well-drafted buy-sell provision will put the business in a position to avoid ownership disputes with heirs, individuals with powers of attorney, ex-spouses, bankruptcy trustees, and estates, who may have very different motivations and desires for the business then your intended partner.

Rights of First Refusal

A well-drafted right of first refusal will protect the business from allowing an owner from selling its interest to a third-party without the consent, approval, and right of the company or other current owners to buy that interest first. This is important so that a controlling interest is not sold to a competitor or other party who may have a different vision for the future of the business, which could lead to division and distraction in working through these issues.

For-Cause Repurchase Rights

One of the ugly places a business can find itself in is having a major equity holder engage in an activity that seriously hurts the business, its reputation, or its future prospects and then having to continue to pay that person as the other business owners rebuild the business through their own efforts, fixing another partner’s damage. A properly drafted, for-cause repurchase right will allow a company to repurchase the equity of such a bad-actor partner at a value that takes into account the damage that partner did to the business.

Drag-Along Rights

Another bad place a business can find itself in is having a minority owner holding back a major transaction. One way that this can happen is in the event of an equity sale of the business. In an equity sale of a business, it is necessary to have all equity owners be required to sell and transfer their individually-owned equity in the business. Without a drag-along provision, you could find yourself in a position where an owner of less than 1% of your business could stop the ability to complete an equity sale, forcing you to do an asset sale of the business instead which could have far-reaching tax consequences.

What to Avoid

Anti-Dilution Clauses

This is a provision you should avoid as if your life depended on it, except for in very limited exceptions. An anti-dilution provision is a provision that says that a certain owner’s ownership percentage cannot dilute below a certain percentage of equity in a company. This becomes a huge problem as a company grows and scales. The difference between 5% of an early-stage company with limited value and 5% of a company on the verge of going public is huge. These situations also come with significant tax implications when new equity has to be granted without additional compensation. If someone says they want anti-dilution, say no and offer them a preemptive right to be able to purchase an amount of any future round of financing at the same terms and conditions as future investors.

Unanimous Consent

I’m always very concerned about unanimous consent provisions in an operating agreement or shareholder agreement. This is because the only partner a unanimous consent requirement protects is the smallest owner. Imagine our government trying to function if one congressman could stop any legislation from passing. It’s important to carefully figure out a supermajority consent or voting structure for your business that avoids deadlock and requires proper approval of business decisions that generally favor the best interests of the business and its owners, but giving the tiniest owner a veto right on the business decisions is a dangerous proposition.

Is this Really that Important? But I Get Along Really Well With My Partners...

As business lawyers, our job is to plan for the worst. One of the things that we hear all of the time is: “I trust my partners and we’ll be able to work things out.” While this may be true in most scenarios, there are a minority of scenarios where this is not the case and the damage leveled in such scenarios can be crippling.

We have witnessed companies in a matter of weeks going from the prospect and commitment for 7 and 8 digit investments to filing for bankruptcy because their operating agreements and shareholder agreements were unbalanced in protecting the owners instead of the business.

Controlling your cap table is critical for the future of your business.

If this all seems like a lot to understand or follow, or you just want a business lawyer to walk you through this process, don’t hesitate to reach out to an experienced business attorney or corporate lawyer at Freeman Lovell. We have the resources, expertise, and experience to guide you through your entrepreneurial journey from idea to exit.

Call or text us at (385) 217-5611 or send us a message through our Contact Form .

Is Your Team Oversharing With AI?

By Adrienne Langmo • January 8, 2026
AI is undoubtedly amazing. On one single platform I can direct it to, for example, “write me a 400-word blog post about the legal risks of private employees use of AI directed at Utah small to medium-sized businesses.” And then ask it to illustrate that post with an image of a robot in a skirt suit. (And now you’ll wonder if I even wrote this post myself…. I did. But I did not sketch the image myself.) And we all know AI has real limitations. We’ve heard the stories about AI hallucinations, where it simply invents an answer. And often AI simply gets it wrong. For example, I often use AI to pull up the citation to a statute and often it produces a link to a bill that hasn’t been enacted, a bill that’s been repealed, or a similar statute that’s applicable to a different industry than the one I asked it to find. But there’s also legal risks in using “Open Access” or “Free Tier” AI versus “Enterprise” or “Business” AI. Open access/free tier AI is the version you can use for free on a web browser or on app on your computer or smart phone. With many of these tools, user inputs may be stored or used to improve the model. Enterprise or business AI, by contrast, is a commercial‑grade system that typically offers encryption, enhanced privacy controls, and contractual data‑security commitments. If you do not have the latter­­—enterprise AI— then you really may want to find out what your employees are inputting into an unsecured AI tool. Is it client or employee information, like personally identifiable information? Medical information? Company trade secrets? Financial information? Depending on your company size and the type of information input into an unsecured AI tool, employees may be creating legal risk under Utah’s data breach notification law, the Utah Consumer Privacy Act (for businesses that meet its thresholds), federal privacy laws, even anti-discrimination laws and contractual confidentiality obligations you have made directly with your clients. The New Year is a great time to review old policies, create new ones, and train staff on these concerns. We are here to help you navigate these emerging issues! -By Adrienne Langmo

RIFs and Furloughs, the Federal Way

By Adrienne Langmo • September 30, 2025
As the federal fiscal year draws to a close, thousands of federal employees face an unsettling possibility if a continuing resolution is not passed: not just another shutdown and temporary furlough, but permanent layoffs through Reduction in Force (RIF) notices. This week, the Office of Management and Budget (OMB) instructed federal agencies to consider issuing RIF notices to employees (if certain conditions are met) rather than the usual temporary Furlough notices issued during shutdowns. This is a big shift. But it does not mean layoffs are guaranteed. If they occur, federal employees are protected by a robust set of legal rights. There’s still a process before a RIF can be properly issued, complete with notice rights, retention rights, appeal rights and such other rights that the OMB does not purport to usurp. That said, we understand that the anxiety of this uncertain moment is real. Here are some tips to best prepare for the unknown, come the end of the federal fiscal year: Download Your eOPF, ASAP o Your electronic Official Personnel Folder may become inaccessible during a shutdown. Download it now to preserve your employment records. Download Your last 3 Performance Appraisals, ASAP o Include mid-year reviews and commentary. These documents may affect retention rights in a RIF. Also save records of other awards, commendations, and other notable performance records. Save Key Communications o Save emails, memos, or notices from HR or supervisors about your employment status or shutdown protocols. Ask Questions o Supervisors, HR, and union reps are navigating this too. Don’t hesitate to ask questions. If you receive a RIF notice or suspect you were subject to procedural violations, don’t hesitate to reach out to us for our advice. We are here to help. Shutdowns may be political. Your livelihood is personal. Let us help you safeguard it. -Adrienne Langmo, Partner

Demystifying FMLA

By Adrienne Langmo • September 12, 2025
If you're working for — or running — a business with under 50 employees, the Family and Medical Leave Act (FMLA) might seem like a distant federal regulation. But for eligible employees and covered employers, it’s a powerful tool for balancing work and life during major health or family events. Here's what you need to know. 🧩 The What The FMLA is a federal law that allows eligible employees to take up to 12 weeks of unpaid, job-protected leave in a 12-month period for specific family or medical reasons, including: The birth or adoption of a child Caring for a spouse, child, or parent with a serious health condition Recovering from a serious health condition themselves Certain military-related family needs The leave can be taken intermittently, in blocks, or in one long swath. During FMLA leave, employers must maintain group health benefits as if the employee were still working. When the leave ends, the employee is entitled to return to the same or an equivalent position. 👥 The Who FMLA is mandatory for employers with 50 or more employees within a 75-mile radius. So, if your business has fewer than 50 employees at a given location, you’re not legally required to offer FMLA leave —but you can choose to adopt similar policies voluntarily. Employees must also meet FMLA eligibility criteria: Worked for the employer for at least 12 months Logged at least 1,250 hours in the past year Work at a location with 50+ employees within 75 miles *State employees may have additional benefits provided under state law. Here, we’re discussing private employers and employees. 🛠️ Employer Takeaways Treating employees appropriately during their FMLA leave and upon their return can present some hurdles for employers and coworkers, particularly when an employee has been on leave for some time and, e.g., projects or programs have evolved in their absence. You don’t have to navigate these situations alone; we can provide your team with the tools and information necessary to smoothly navigate the full FMLA process and avoid any sticky FMLA retaliation or interference claims. And, even if you’re not legally bound by FMLA, offering comparable leave can be a smart move. It builds trust, boosts retention, and shows you value your team’s well-being. Consider crafting a voluntary leave policy that mirrors FMLA protections, including: Clear eligibility rules Defined leave duration Job protection guarantees Coordination with paid time off or disability benefits For small businesses, this means you have flexibility—but also responsibility to communicate policies clearly. Want to overhaul those policies or craft great messaging to your team, give us a call! We’re here to make leave policies less painful and more practical. 📣 Employee Takeaways If you work for a small Utah employer, ask about your company’s leave policies. While FMLA doesn’t require you to use your accrued leave during your FMLA leave, it allows your employer to write into its policy a requirement that you do so. Make sure you read that policy! And, even if FMLA doesn’t apply, your employer may offer benefits similar to FMLA. If you’re dealing with a serious health issue or family emergency, document your situation, give notice as early as possible, and follow internal procedures. Need help understanding those procedures or your rights as an employee? We got your back! ⚖️ Final Thoughts FMLA is more than a legal acronym—it’s a lifeline for employees facing life’s biggest challenges. For Utah employers, understanding the law and choosing to offer similar protections can set your business apart. Whether you're an HR manager, CEO, or a team member, knowing your rights and responsibilities helps everyone navigate leave with clarity and compassion.