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Mark A Johnson, PC

Call us (678) 224-6258
Serving Marietta and Atlanta

Entrepreneurial and Closely Held Business Law

Marietta attorney helping Entrepreneurs and Family Businesses throughout Metro Atlanta

A closely held corporation has only a few shareholders, who are associated in some way, such as members of the same family. Like a traditional corporation, a closely held corporation is a legal entity, separate from its owners and created under Georgia law. At Mark A. Johnson, PC, we have the extensive business law knowledge required to help you form and maintain a closely held business. The differences between a traditional corporation and a closely held corporation can be summarized as follows:

Corporations

  • Large number of shareholders
  • Independent shareholders
  • Because there are many shares, there is a market for ownership interest and shares are traded on a public stock exchange
  • Run by a board of directors, who delegate day-to-day operations to officers and managers

Closely-held corporations

  • Few shareholders
  • Related shareholders, such as family members or owners who are closely associated in some other way
  • Because there are few shares, the market for ownership is limited, so shares are privately traded
  • Run by majority shareholders who are the owners with the greatest investment and the greatest risk

How a closely held corporation can benefit your family business

The death of a principal owner is a major challenge to family businesses that are not incorporated in Atlanta. Incorporating your family business into a separate legal entity ensures that it can continue to exist after the death of the principal owners.

A closely held corporation also benefits the family by shielding the owners from personal responsibility for the debts and liabilities of the business. In addition, this form of business entity gives the owner-shareholders the flexibility to participate in the day-to-day operations and control of the business.

However, there are some potential drawbacks to consider when operating your family business as a closely held corporation:

  • Because shares are privately traded, an owner wanting to sell his or her shares may have difficulty in finding a buyer. The shareholder agreement may place restrictions on the transfer of shares, such as requiring the approval of the other shareholders.
  • The income of the business is taxed twice, first as corporate income and then as individual income of each shareholder.
  • Forming the family business as a closely held corporation is more complex than setting up other forms of business entities.

Schedule a free consultation in a business attorney's office

For a free initial consultation to discuss your specific needs and to find out how Marietta lawyer Mark Johnson can transform your family business into a beneficial closely held corporation, please call (678) 224-6258 or contact us online.

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