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Industries Privately Held & Family Owned Businesses

Overview

Privately held and family owned businesses typically face unique issues and challenges not usually confronted by public companies. 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 interpersonal dynamic. A clearly defined strategy for running and transitioning the business is essential for both corporate and personal 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.

Services

  • Succession and Tax Planning. Considerable thought and planning must go into the enterprise’s plans for succession with respect to management, ownership, and future leadership. These issues often involve complex tax considerations to transition 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, additional tax, business and estate planning are often required to deal with succession and inheritance issues. We often call upon the expertise of our trusts and estates department to implement 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 have historically received compensation.
  • Boards of Directors and Advisors. 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 establishing a Board of Advisors comprised of outside business leaders and advisors who can help the company with strategic 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 and closing 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).

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.

Experience

  • 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.

Newsroom

Publication

Corporate & Business Transactions Report — 2023

February 2, 2024

We represent buyers, sellers, and investors — including middle-market and family-owned companies — on their most important business transactions. Our professionals bring a critical combination of experience, practicality, and a deep understanding of market terms — enabling us to achieve outstanding results for our clients.See how we drove results for our clients in 2023 across the industries we serve.

Publication

Important Data Privacy and Security Considerations for Privately Held & Family Owned Businesses

October 6, 2022

The importance of developing and maintaining a robust data privacy and security program cannot be overstated, particularly given the increasing sophistication of bad actors, the growing privacy concerns of consumers, and the proliferation of data privacy laws throughout the country and around the world. Add to this landscape the commercial, reputational and operational harms to companies that experience a data breach or other security incident, and it becomes clear that all companies, no matter their size, should invest time and resources into developing a robust data privacy and security prog…

Publication

Critical Considerations for Drafting and Negotiating Working Capital Adjustments

August 26, 2022

Working capital is essential to the operations of every business, making it a critically important component in many M&A transactions. From the buyer’s perspective, the purchase price it offers typically assumes that there will be a normal and sufficient level of working capital in the business so that it will be able to operate on a day-to-day basis post-closing, and therefore wants to ensure that the seller does not extract working capital prior to closing. From the seller’s perspective, if working capital levels at closing happen to be in excess of normal levels, the buyer should pa…

Publication

Converting an LLC to an S Corporation: A Mistake Waiting to Happen

May 9, 2023

Limited liability companies (LLCs) offer significant tax flexibility – for one thing they can elect to be treated as disregarded entities, partnerships, C corporations, or S corporations, and can even shift between those tax classifications. Some advisors will suggest changing an LLC’s tax treatment from a partnership to an S corporation (the “Conversion”) for employment tax benefits and to avoid the extremely complicated partnership tax rules,[1] but the Conversion contains significant traps that can make it a mistake waiting to happen. It is not as simple as merely filing an IRS form…

Publication

Is an Employee Stock Ownership Plan (ESOP) the Right Succession Tool for You?

April 19, 2022

Succession planning is complicated but essential for any closely held business. A business needs to consider the next generation of leadership to ensure that the business remains viable, retains its value and fulfills its obligations to employees, customers and clients. Options for business transition include a transfer of ownership to the next generation of leadership (whether family members or employees), selling the company to a third party, or liquidating the business.

Publication

Addressing Dispute Resolution in Close Corporations or Family Owned Businesses

March 25, 2022

Close corporations and family owned businesses typically create and preserve important value for the family, in both personal and economic ways. These types of businesses can also be ripe with mismanagement, disappointments and potential disputes. As a result it is important to consider and document dispute resolution mechanisms ahead of time, typically in a shareholders’ agreement or limited liability company operating agreement.

Publication

Owners' (or Shareholders') Agreement: Why it is Important, and What it Should Include

February 25, 2022

Any closely held business with more than one equity owner should have a written agreement governing each owner’s rights and obligations with respect to the business.  For corporations, the shareholders may memorialize these agreements in a shareholders’ agreement, while the provisions typically appear in an operating agreement for limited liability companies.  The ideal time to enter into the written agreement is at the inception of the business, but the owners may decide at any time to prepare an owners’ agreement.  Time is of the essence, because certain events outside the control o…

Publication

3 Tips for Successful Succession Planning

November 11, 2021

Privately owned businesses are often a way to create a lasting legacy and build generational wealth. These businesses are tied together tightly with both loyalty and keen business sense. Having worked with some clients for more than eight decades, Hinckley Allen’s Privately Held & Family Owned Businesses team has the experience and insight to lead your business into its next chapter.

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