Legal Question in Business Law in New York

Minority Interest in Small Businesses

Hello! I am in negoitiations with another individual to purchase an exisiting small business. Neither of us is having to put up any personal monies in this deal, it is all debt financed. He is going to have to personally secure the debt, I am not. He will be managing the business and working it full time. I obtain my ownership becuase I put the deal together and will be running the finance department which will be part time. We have informally agreed that my % of the business would be 15% he would have the other 85%. I am wondering if we were to set this up as a corpoartion what are my risks as a minority shareholder? What could I do from a legal standpoint to minimize and protect myself from those risks? Finally, if we set up as an LLC could we work it so that the profits of the comapny were distributed on an 85/15 basis but the ownership was 50/50? Also, if that is possible, if we ever sold the company could the proceeds of the sale of the business also be split that way?

Thanks,

--name removed--


Asked on 1/27/05, 5:45 pm

4 Answers from Attorneys
Robert DiPaolo The Fidelis Group, LLC

Re: Minority Interest in Small Businesses

Yes, you can do exactly as you propose. I have significant experience perparing such agreements. Please contact me at [email protected], you would like to discuss this matter.

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Answered on 1/27/05, 5:48 pm
Asi Kirmayer Kirmayer PLLC

Re: Minority Interest in Small Businesses

The one thing you can and should do is to have a shareholders agreement or LLC agreement which will set forth your ownership and your rights and interests in the corporation or LLC.

You should consult an attorney to do this properly.

I am available to discuss this if you wish at (212) 695-6400.

Best of luck.

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Answered on 1/27/05, 5:50 pm
Gary Adelman Adelman Matz, P.C.

Re: Minority Interest in Small Businesses

Not only can you do those things, but I would recommend a number of provisions to protect you as the minority shareholder. All significant decisions, such as, a sale of the Company or a sale of an asset or a distribution of assets, etc. can only be done if 100% of the shareholders agree.

We have a lot of experience in this area, if you would like to discuss this with me further, please feel free to contact me for a free consultation

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Answered on 1/27/05, 5:55 pm
Anthony Park Anthony S. Park, PLLC

Re: Minority Interest in Small Businesses

Dear sir or madam:

The answers to your questions depend on a full analysis of your entire sitation. For example: yes, a carefully structured LLC may provide for voting power out of proportion with allocation of profits and losses. However, doing so may result in a negative tax impact on the transaction.

Contact my firm at [email protected] to schedule a consultation.

Anthony S. Park

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Answered on 1/27/05, 5:57 pm


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