Key Takeaways: Minority shareholders in closely held corporations may face a challenge to their investment due to their lack of control over company decisions. Legal protections do exist to safeguard their interests, including rights to financial information, fair treatment, and avenues for relief in cases of oppression. State laws vary,…
Key Takeaways A minority shareholder oppression claim requires clear evidence of damages, including a reliable valuation of the business. In Jennings v. Simmons, the plaintiff’s failure to present valuation evidence prevented the court from awarding damages. The court ruled that without financial records or expert testimony, it could not determine…
Shareholder Disputes in closely held corporations are common and often arise from voting deadlocks, financial disagreements, and claims of minority shareholder oppression. New York law provides several legal remedies, including dissolution proceedings, buyouts, and derivative lawsuits. Preventative measures, such as well-drafted shareholder agreements, can…
Key Takeaways: When to Seek Judicial Dissolution of an LLC What is Judicial Dissolution? A court-ordered termination of an LLC when voluntary dissolution is not an option. When Should You Seek It? Deadlock among members preventing essential business decisions. Conflicts that make business operations impossible. Fraud, oppression, or…
Advances or capital contributions made to a limited liability company without authorization may be a source of conflict. Using unauthorized advances or capital contributions as a means to exert control may be a breach of fiduciary duty. A well-drawn operating agreement addresses how and when the owners put additional money…
Shareholder disputes in a closely held business threaten the business and personal financial interests of the owner. New Jersey law provides the owners of a closely held corporation with rights and remedies that assure access to information and the financial benefits of ownership. Closely held corporations can use effective planning…
The IRS often challenges “inter vivos” transfers of property that reduce estate tax liabilities and a common issue is whether there was a bona fide business purpose or if it was simply a pretext to avoid taxes. A poorly conceived transfer, however, can lead to advers financial consequences through accuracy-related…
Effective strategic planning for the closely held business owner should begin with a formal valuation. The information gathered and considered in a business appraisal provides insights into the business overlooked in day-to-day operations. Valuation studies provide an insight into the potential value of the business and roadmap to to becoming…
Intangible assets are typically the most valuable possession of a closely held business, but often are poorly protected. Risk mitigation through a business bulletproofing process can protect those assets from being misappropriated. Intangible assets include customer relationships and intellectual property. I sometimes ask closely held business owners if they lock…
The Need to Exit Our Closely Held Business is Non-negotiable. We all leave, eventually. Exit and succession planning protects our business, our employees, and our families. The effects of most business disasters are avoidable. “Hope is not a strategy.” Vince Lombardi If you own a business, you know that ‘winging…