Dinn, Hochman & Potter, LLC

Closely held business organization has common pitfalls

It makes sense that large, public corporations receive more press than small businesses. After all, those who have a financial interest in a large corporation may be far-reaching since public companies offer their stock on the open market. However, the most common Ohio business organization is the closely held business, which means only a few people own the company. While closely held businesses have the advantage of allowing owners to maintain control of their companies, there are risks those owners must be careful to avoid.

Like any successful business, a closely held operation needs a strong contract to protect its owners from many contingencies. However, that contract may become the company's worst enemy if it does not evolve and grow with the business. Shareholders who meet regularly to evaluate and discuss necessary changes in the contract may have a greater chance of avoiding the conflicts that can damage relationships among partners.

A major element of successful entrepreneurship is planning, and this may be especially crucial for a closely held business. Since so few hold an interest in the company, the death, disability or divorce of even one member may place the entire business in jeopardy. Having the foresight to plan for these contingencies and include them in a shareholder agreement can be a tremendous benefit to the company.

In addition to these issues, a thorough contract for closely held businesses may address other common issues, such as the regular valuation of the company, the methods of bookkeeping and other matters related to a particular business organization. Small businesses that have regular shareholder meetings often find they can avoid disputes that erupt into litigation. An experienced Ohio business attorney can offer assistance in these and other areas.

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