Closely Held Company Litigation Attorneys
Closely held entities occupy a unique space in the realm of business law generally. Disputes that arise involving closely held entities can often be some of the most acrimonious and emotionally-fueled disputes most attorneys will deal with. Having a good attorney offering you counsel should you be involved in such a dispute is critical to making sound business decisions when the emotional component may cause you to pursue less fruitful directions.
What is a closely held entity? Whether they are corporations, limited liability companies, or even partnerships, the IRS defines a “closely held corporation” as a corporation that has at least fifty percent of its value in terms of outstanding stock held by five or fewer individuals. Closely held entities can be corporations, limited liability companies, partnerships or even trusts, joint ventures or other niche business entities. The legal principles that apply to disputes arising in closely held entities are very similar, regardless of how they are organized.
Closely held entities are often companies that are owned by close associates or, in many cases, family members. A common characteristic is that the owners enjoyed a high level of trust, comradery and common purpose in the beginning of the company’s history which, not surprisingly, often leads to a lack of documentation. The owners often believe that they were all in agreement about the goals and the direction of the business venture in the beginning because, for the most part, they were. As the years go by, disputes can and do arise because personality conflicts come to the forefront. This phenomenon is particularly accentuated during times of great success where disputes arise pertaining to the division of profits or with respect to differences in goals such as growth, additional investment, or profit-taking. Similarly, downturns and hard-times bring out nasty disagreements that had been in remission while times were good. If any of this sounds familiar, keep reading! Significant changes in circumstances or leadership often bring out conflict. An original founder might experience poor health or may pass away leaving stock and leadership responsibilities to later generations which may or may not be well received by others in the closely held business.
The one thing that makes disputes in closely held entities particularly difficult is that aggrieved or dissatisfied owners aren’t free to simply call their broker and sell their stock. There is typically a very limited market for ownership interest in closely held entities, and often widely divergent views about the value of that ownership interest. Either the whole business is sold if most of the owners can agree on such an approach, or it won’t be sold, which just makes aggrieved owners even more miserable or feeling “trapped.”
At Marrs Griebel Law, our attorneys have years of experience in dealing with the countless variety of disputes that arise in closely held entities. As mentioned above, there is a unique body of case law and expertise that an attorney should have if the attorney is to most effectively represent the client. Our attorneys have represented the companies as well as individual owners of closely held companies. Claims often involve unique legal claims such as minority shareholder (or LLC member) oppression claims, shareholder (or LLC member), derivative claims, fraud claims, claims for accounting, and almost always claims for shareholder (or member) buyout and/or judicial dissolution.
If you are involved in a dispute involving a closely held entity, or even if you have an ownership in a closely held entity and want to begin a dialogue about your legal rights and ultimate exit strategy, contact us today for a free consultation. Time is typically the enemy with these situations and options that may have been available early on cease to be available later due to strict deadlines and time-constraints. We recommend you act sooner rather than later as bad situations rarely get better based solely on the passage of time.