Investing in the Close Corporation: What the Minority Shareholder Needs to Know before Giving up Money and Power


Much of the focus in business planning and choice of entity is spent on tax considerations, startup financing, and liability issues owed to the world outside of the entity. Little attention, if any, is given to fiduciary duties between the owners. Even if a discussion occurs, it is likely to focus on the duties of majority owners and/or managers. The surprise comes when a minority owner finds out it may owe a fiduciary duty to the majority—a non-intuitive result. This article attempts to serve as an aid to a minority investor before committing to the investment in a startup close corporation.


Business Organizations Law | Organizations Law

Date of this Version

January 2004