Family owned corporations are subject to the same statutory requirements regarding entity governance as non-family owned businesses.  Thus, in order to fully comply with the applicable statute for the state where the business is incorporated, a family business should pay attention to all provisions that require annual or other ongoing action by the company.  These include:

  1. Holding annual shareholder meetings
  2. Holding formal elections of directors at shareholder meetings,
  3. Documenting actions taken by the unanimous consent of the directors without a meeting
  4. Maintaining complete records of the company’s operations and finances 

Many companies also have detailed provisions in their by-laws that spell out additional duties of directors and officers, along with shareholders’ rights and responsibilities. 

Continue Reading Do “Corporate Formalities” Matter in Family Businesses?

Welcome to Murtha Cullina’s Family Business Perspectives Blog.  This Blog is designed to identify and comment on common legal issues and current cases and developments that affect family-owned and controlled businesses.

Why focus on family-owned businesses?

Approximately 90% of businesses in the United States are family-owned or controlled.  These businesses generate over 50% of the country’s GDP.  Clearly, there are some noteworthy and very large family-owned or controlled businesses, including Walmart, Ford, and SC Johnson Company (which proudly bills itself in its ads as “a family company”), and these companies have succeeded through many generations of family management and ownership.  There are also millions of other less well-known family businesses which operate on a smaller scale or strictly in their local markets – from the corner store, to the family farm, to the manufacturing company in the local industrial park, to the real estate holding company that owns and manages commercial or residential buildings, and so on.  Regardless of the industry, all these family businesses, at one point or another, face the common issues of whether the business will transfer to a future generation, when and on what terms that may happen, and which family members will continue to be involved. 

Continue Reading Welcome to Murtha Cullina’s Family Business Perspectives Blog.