When two people start a company, neither wants to give control to the other, so ownership is usually split 50/50. This sounds like a great idea at the outset, when everyone is on the same page, and there is usually no other practical way to proceed. But when you and your partner start having different ideas about the direction of the company, and significant trouble ensues, the law of New Jersey may provide the practical remedy that you are looking for.» Read More
When you find yourself involved in a minority shareholder dispute, whether you are the Company (majority), or the minority owners, the role of the company accountant is often somewhat unclear. The more experience your company accountant has with dealing with differing shareholder factions, the better.
For example, New Jersey law spells out precisely what financial documents a minority shareholder is absolutely entitled to see, and the list is not terribly long. » Read More
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
Shareholder dispute litigation, especially among family members, is often about much more than the controversy actually at stake in the litigation. There are often underlying psychological underpinnings for what has led to the lawsuit.
For example, in a recent case, the majority shareholder suddenly cut off his brother, a one-third owner, from all financial information. Despite repeated demands, the majority shareholder simply would not share anything related to the business. » 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
Is the Next Generation Ready to Take Over Your Business?
Having your child work in the family business that you helped grow from the ground up may be the thing you are most proud of, possibly in your entire life. Knowing your business will not die with you can be a truly liberating feeling. But when you do not own 100% of the company, and you have a business partner to answer to, that means that your child has to answer to him, as well. » Read More
Protecting the Second Generation from Oppressed Shareholder Claims
In my last post, I addressed how you and your business partner, as equal 50% shareholders, can protect yourselves from claims brought by the next generation once you begin to turn over the company reins. This time I want to discuss other difficulties that can be encountered when turning the company over to your children, and how to protect your children from oppressed shareholder claims.» Read More
Surviving in business is difficult with a business partner, especially when you are both 50% shareholders, with neither of you in total control. Cooperation and trust are critical, and the relationship could have fallen apart at so many different times over the years. Disagreements about the future direction of the company likely have occurred, but you survived them all. As you approach the age where you can begin to see your retirement on the horizon, questions inevitably arise about the future of the company once you are no longer there. » Read More
Handling business partner disputes often means being involved in family fights; it’s simply the nature of the business. While not all closely held businesses are family-owned, many are. And family-owned companies tend to have more problems between business partners than other types of companies, since interpersonal issues frequently mix with the business end, often to toxic result.
If you are reading this and are having your own issue regarding a family-owned business, then this is nothing new or unexpected. » Read More
Many small company owners think they are doing the right thing by planning for the “orderly transition” of ownership from one generation to the next. Often done on the advice of an estate planning attorney, the sole owner for a generation or more often outright gifts his shares to his children.
If you intend to leave the company without having any further rights, ceding total control to your children, then there may be little downside to this approach. » Read More