Dinn, Hochman & Potter, LLC

Closely held business organization has benefits

Starting a small business in Ohio means making many decisions before the first transaction is ever made. One of the first decisions may be the type of business organization to use that will be most appropriate for the goals of the entrepreneurs. Many just starting out find that partnering with several people is a good way of sharing the expense of business startup and operations. This is why about 90 percent of all U.S. businesses are closely held.

A closely held, or close corporation, is a private business in which a limited number of people hold all the shares in the business. These shareholders are often the same people who own and run the business, and they are typically family members. A closely held business is so called because the shares of the company are held close to the business and are never sold to the public. Any shareholder who wants to sell stock must do so within the group of existing shareholders.

The advantages of a closely held business include maintaining more control over the direction of the business. Publicly traded companies must act in the interests of the shareholders, but with fewer people holding shares, a closely held business has the option of taking more risks and trying new things. Of course, with fewer shareholders, the business owners are limited in the amount of capital available to them, and stock prices may remain low for the company.

Deciding on the best business organization for an Ohio company is critical for its success. There are many steps to take to minimize the number of conflicts that often arise in a new business. Seeking legal advice and support from the earliest planning phases and throughout the life of the business is always a wise idea.

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