To some extent, closely held businesses, including family businesses, can face the same legal problems as any other business organization.
However, family businesses in New York City and the surrounding suburbs may more frequently run into legal problems related to the following:
- Family dynamics are always an issue that lurks at least under the surface of any family business.
- Especially if there is some personal baggage involved, the different family owners may disagree profoundly about business decisions or just feel they are being treated unfairly.
- Likewise, in a smaller business, when there are internal disputes, they tend to affect the business’s day-to-day operations more.
- On a related point, business succession can be a real sticking point, as can a situation where a family member is no longer able or willing to remain in the business.
- Too often, family businesses operate without even minimal legal formality. While a culture based on trust can be an asset, businesses of all shapes and sizes need a detailed written legal strategy. Likewise, the business owners should have formal legal agreements, like a buy-sell agreement or an operating agreement, between themselves.
- In certain situations, the law will be different with respect to closely held businesses as opposed to larger companies.
Closely held businesses should develop a plan to face its unique problems
Every closely held business in New York is going to have a different set of legal problems depending on the nature of its business as well as its organization, size and financial position.
The key though is that the leadership of a family business can save a lot of time, money, effort and legal risk by being proactive. They should make sure that the right legal structure is in place to protect their family’s investment for future generations.