Most of the businesses I have advised were closely held: family companies, partnerships, founder-led enterprises, and the boards that govern them. The recurring problems are remarkably consistent, and almost none of them are about the market.
Governance documents are written for the good years
Operating agreements and shareholder agreements are usually drafted when everyone is optimistic and aligned. The provisions that matter — deadlock, valuation, transfer restrictions, involuntary departure, death of an owner — get the least attention because they contemplate an unwelcome future.
That future arrives on its own schedule. Revisiting these documents every few years is the single highest-return legal exercise available to a private company.
Succession is a business plan, not a will
Family businesses often conflate estate planning with succession planning. The first determines who owns the company; the second determines who can run it, and whether the customers, lenders, and employees will follow.
Compliance debt accrues quietly
Lapsed filings, unsigned amendments, stale licenses, and undocumented related-party arrangements rarely cause immediate harm. They surface at the worst possible moment: during diligence, financing, or a dispute.
Bring counsel in earlier than feels necessary
The least expensive legal work is done before a decision is made. The most expensive is done after a document has been signed or an agency has been told something imprecise.
A short diligence checklist for owners
- Are the governance documents current and signed by everyone?
- Is the ownership ledger accurate and reconciled?
- Are all licenses, permits, and registrations in good standing?
- Is there a written succession plan for the two key roles?
- Do related-party arrangements exist on paper as well as in practice?
About the author
Charles K. Blackmon is an attorney and business adviser in Greensboro, North Carolina, whose practice spans business and regulatory counsel, land development, and government affairs. Read the full biography.