Closely Held Family Business Disputes

Businesses that wish to benefit from a corporate structure, but who also want to keep matters in the family, may opt to form a closely-held family corporation or limited liability company (LLC). This offers certain advantages in areas like liability, and it allows family businesses to keep business matters private. Disputes that arise between owners or officers in such a business, however, have an extra dimension–the family relationship–not always found in business disputes. This could offer an incentive to work towards a mutually agreeable resolution, but it could also further complicate matters. In situations such as these, a Chicago family business dispute lawyer with experience in dispute resolution, such as mediation and arbitration, can advise a party of their rights, their obligations to the business and to the family members, and various methods of resolving the dispute.

Closely-held businesses include a small number of shareholders or members. Some states impose restrictions on the sale of shares in a closely-held corporation, requiring a departing shareholder to sell them back to the company. In a closely-held family business, the shareholders or members typically have a family relationship, and the company’s operating rules might require that ownership of the company remain within the family.

Disputes among family members may include:

• Minority shareholders’ rights;
• Management or governance disputes;
• Disputes over compensation or dividends;
• Disputes arising during business succession planning;
• Disputes arising out of the divorce of a shareholder or member;
• Bankruptcy or insolvency;
• Employment disputes;
• Real estate purchases or sales;
• Admission of additional shareholders or members; or
• Issuance of stock or other equity.

Unlike other businesses, members or shareholders in a closely-held family business might not be able to divest and walk away from the company. Family businesses should therefore consider all available methods of dispute resolution, up to and including litigation, with the goal of preserving family unity, if not harmony. The arbitration process allows parties to a dispute to present their claims to a neutral arbitrator who acts as a sort of private judge. Mediation involves a neutral mediator who facilitates negotiation between the parties with the goal of finding a mutually agreeable settlement. Based in Chicago, our team of family business dispute attorneys includes several trained and certified arbitrators and mediators. These methods of dispute resolution have the additional benefit of being outside of the court system, meaning that all issues remain private.

When parties to a closely-held family business dispute cannot resolve their disagreements privately, we can assist with the litigation process. This has the advantage of offering finality, as a court’s order has the full force of law. The process can be lengthy and expensive, however, and can expose the family business dispute to publicity, as court files are usually public record.

The Chicago family business dispute attorneys of Lubin Austermuehle, P.C. have practiced business law in the greater Chicago area and DuPage County, as well as elsewhere in Illinois, Indiana and Wisconsin, for more than twenty-five years. Contact us today via email, at 630-333-0333 to schedule a consultation with a family business dispute lawyer in Chicago or Elmhurst, Illinois.