Company founders often wrestle with how to bring their children into the company fold. A shareholder may want his children to become owners, but not all owners should necessarily work in the business. If a first generation owner has more than one child who wants to work in the family business, there are often challenges to overcome. When there are two or more founders, though, and children of multiple different families want to become employees, the challenges are even greater. » Read More
In the last year or so, I have seen several business owners who are not very happy that New Jersey LLC members now have the same protection from minority oppression that is enjoyed by minority shareholders of corporations. To “protect” against such lawsuits, apparently several attorneys around the state are advising clients to add to Operating Agreements a clause that waives this protection.» Read More
One of the most difficult things for a family owned business to do is transition to the next generation. And the more divided ownership becomes, with more members of the successor generation, the harder this is to accomplish.
The first generation is often comprised of Dad, and Dad alone. (Family-owned companies with multiple siblings/cousins as founders face the issues discussed below much faster, and often without time to plan.) When Dad ages, or as he starts to plan for retirement, the Estate Plan kicks in, and the company gets left to multiple children. » Read More
No matter how many times I write about it, new clients keep coming in who have no signed shareholder agreement. As regular readers of this site well know, a minority shareholder still has protection against wrongful acts based on the New Jersey shareholder oppression statute. However, there are many ways that not having a shareholder agreement could cause a significant problem.» Read More
Do you remember when you first began your company, and you used to trust your business partner? For many people reading this website, those days unfortunately seem long ago and far away.
When you started things up, you may not have paid close attention to at least some of the details. It may be that while you were focusing on big picture items, not all i’s were dotted, and not all t’s were crossed.» Read More
Many times a law is enacted, but a judge or appellate court makes a decision that casts the interpretation of that law into chaos. (Of course, none of the judges I regularly appear before would ever do this.) Almost one year ago, the New Jersey LLC Act was amended to give LLC members the minority owner oppression remedies historically applied to shareholders of a corporation.» Read More
Previously on this website, I wrote about how a recession can help an unscrupulous business partner hide his fraud (Nov. 2008). For example, I explained that “tough economic times” can be used as an excuse to stop paying dividends or providing other financial benefits to minority shareholders. However, it can be equally true that a stronger economy, like we may be experiencing at the moment, can also be used to mask fraud.» Read More
The difference between owning 50% of your company and owning 51% is great. But the difference between owning 50% and owning 49% could be catastrophic, despite the significant remedies available to oppressed minority shareholders in New Jersey.
After reading the other articles on this site, one comes away knowing that minority owners have significant rights in New Jersey (at least, that was my goal). » Read More
When two new clients recently came in to have an Operating Agreement prepared for their newly created LLC, they indicated that they had read my website. Since I had experience in litigating shareholder disputes, they wanted to know how to make a “bulletproof” Operating Agreement, so that there would never be litigation if they disagreed over an issue.
We spent a considerable amount of time trying to come up with a dispute resolution mechanism, but they could not agree on a third party to decide any significant disputes if they ever had one. » Read More
As many of you have read here before, the New Jersey Limited Liability Company Act now includes recovery for minority member oppression. Those remedies cannot be waived, as a matter of law. However, the parties to an LLC’s operating agreement (or a corporation’s shareholder agreement) can agree to an alternate dispute resolution (“ADR”) mechanism in advance, impacting the forum in which these issues will be decided.» Read More