Closely-held business organization types present some unique challenges to small business owners. Owners of such small companies must determine which type of business organization to use. There are a number of choices, each with advantages and disadvantages. Forming the business organization is relatively simple. We provide a general outline by which anyone can form a Texas corporation. However, care must be taken in setting up governance structures where there are multiple owners.
Some types of business organization are more prone to problems with oppressive conduct, some less. General
partnerships, for instance, are subject to very strict legal protections that provide effective remedies for oppressive behavior by managing partners. Until recently, the former shareholder oppression doctrine provided similar protections to minority shareholders in closely-held corporations. Those protections were removed by the Supreme Court in Ritchie v. Rupe. While significant legal rights still exist for minority shareholders, the best protection is always a fair and comprehensive shareholder agreement that provides for dispute resolution and the possibility of an exit in advance of difficulties.
|About the author: Houston Business Lawyer Eric Fryar is a published author and recognized expert in the field of shareholder oppression and the rights of small business owners. Eric has devoted his practice almost exclusively to the protection of shareholder rights over the last 25 years. Learn more||
This post represents our opinion regarding the relevant shareholder oppression and minority ownership rights law. However, not everyone agrees with us, and the law is changing quickly in this area. This page may not be up to date. Be sure to consult with qualified counsel before relying on any information of this page. See Terms and Conditions.