Privately held and family owned businesses typically face unique issues and challenges not usually confronted by more widely-held enterprises. Hinckley Allen lawyers have been advising such businesses for decades, often through generational transitions and other critical steps in the lifecycle of the business. Through our accumulated experience, we understand that the issues faced by a privately held or family owned business often reverberate through the broader family dynamic, and that a clearly defined strategy for running and transitioning the business is essential for both corporate and familial harmony.
In addition to the typical legal and business issues confronting any business, privately held and family owned businesses have unique challenges, including succession and tax planning issues, employment-related issues, retaining quality outside directors and advisors, and managing exit transactions.
- Succession and Tax Planning. Considerable thought and planning must go into the enterprise’s plans for succession with respect to management, ownership, and the impact these decisions may have on family dynamics. These issues often involve complex tax consideration to address transitioning ownership and control to younger generations without triggering unintended gift or estate tax problems. Where certain family members have differing levels of involvement with the business’s, additional tax, business and estate planning often is required to deal with succession and inheritance issues. We often call upon the expertise of our trusts and estates department to advise regarding sophisticated family transition techniques that minimize gift and estate taxes while accomplishing the family’s succession planning goals.
- Employment Issues. Aside from typical employment law issues that arise from time to time, privately held and family owned businesses often need to address issues regarding self-employment taxes and rules relating to the payment of compensation to owners of a business. Additionally, employment issues sometimes arise with respect to family members who may have little actual involvement with the business, but who historically have received compensation.
- Boards of Directors and Advisers. One of the key functions of a diverse board of directors is to bring different skill sets and perspectives to bear on the company’s strategy and direction. However, the boards of privately held and family owned businesses frequently are populated by family members with similar backgrounds and experience. We often advise these businesses on the benefits and challenges of working with an objective and experienced Board of Directors, or Board of Advisors, which are made up of outside business leaders and advisors who can help the company with difficult management decisions.
- Planning for an Exit. Often an exit decision is the most crucial and stressful decision that owners of a privately held or family owned business will make. Hinckley Allen lawyers have advised countless privately held or family owned enterprises regarding exit transactions, from pre-transaction planning, to marketing the business, through the negotiation and ultimate consummation of the transaction. For privately held or family owned business clients that want to maintain a legacy and liquidate some or all of their ownership while providing a benefit for employees, we can assist with the implementation of employee stock ownership plans (ESOPs).
These issues are but a sampling of the unique issues that Hinckley Allen has addressed with privately held and family owned businesses. These matters must be handled with a heightened sensitivity and practical judgement in a family business context, since the decisions made in the board room can have far-reaching consequences. With deep experience navigating these issues, Hinckley Allen attorneys bring a holistic approach to the planning process and are well suited to guide our clients through those challenges.
- Hinckley Allen assisted client Halloran Consulting Group, Inc., a woman-owned, life sciences consulting firm, in establishing an employee stock ownership plan (ESOP). The company was built and grown by the founder, and as part of her long term planning, she saw the ESOP as a way to recognize the important contributions of employees. The Firm analyzed succession-planning options with the founder, evaluated trustees for the employee stock ownership trust, and collaborated with the company’s tax advisors and trustee’s counsel to structure and establish the ESOP.
- Hinckley Allen advised the owners of a 3rd generation family-owned manufacturing business in connection with its sale of the business to a private equity buyer. The transaction involved tax planning for the individual and trust shareholders, navigating competing interests among the shareholders, and addressing real estate which was separately owned by a different set of family members.
- Hinckley Allen represented the shareholders of a family-owned manufacturing business in connection with its sale to a private equity buyer. The transaction involved navigating numerous issues among the shareholders, each of whom were to take on different roles and responsibilities with the buyer. Hinckley Allen has continued to represent the company post-closing, working closely with the legacy family shareholders and new ownership.