What Is a closely held company? In the world of business litigation, you might hear the term closely held company. This refers to any business that has a limited number of shareholders. Corporation stock that is closely held may be traded publicly on occasion but not on a regular basis. Both managers of businesses that consider themselves to be closely held and the individuals who interact with these companies in any capacity could benefit from a clear understanding of what it means to be closely held. This is especially true for both preventing disputes and handling a dispute if one arises.
Basics of a Closely Held Entity
These entities are separate from privately owned firms that issue stock that are not publicly traded. Individuals who own shares of closely held companies should consult with a knowledgeable financial planner who has expertise about the estate and tax ramifications that could come with owning this type of stock.
Differences in Tax Treatment
The majority of transactions between major shareholders and closely held companies don’t get the same preferential tax treatment as those of corporations that actively trade stocks. This is despite the fact that the stock of a closely held company may be listed. This is one of the most commonly misconstrued aspects of closely-held companies, and it’s a misconception that could lead to confusion.
What About Deductions and Losses?
Deductions or losses may not be allowed in certain instances for parties involved in these kinds of transactions. Disputes can easily arise in the instance of partners working in closely held companies or other individuals who are engaged in contracts with a closely held company. If this applies to your situation, you need advice from an experienced Arizona commercial litigation attorney as soon as possible.
Conflicts involving closely held business can quickly become complex. You need to start off any legal dispute by clearly understanding your rights and responsibilities. A commercial litigation attorney should be contacted as soon as a conflict has emerged so as to increase the chances of the best possible outcome in the dispute. A knowledgeable attorney can help to answer your questions upfront and to prepare you for what to expect in the event that the case goes on to litigation. All businesses, including closely held ones, face the potential of risks in the form of lawsuits. Without an experiencing commercial litigation attorney, the dispute process may be more frustrating for you than if you’d retained a knowledgeable attorney sooner rather than later.
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice regarding What Is a Closely Held Company, or any other commercial litigation matters, please feel free to contact Joel E. Sannes at 480.461.5307, or log on to udallshumway.com, or contact an attorney in your area. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the Phoenix/East Valley.