What Private Companies and Family Offices Need to Consider in 2025

1. Mergers and Acquisition Landscape

Much like 2024’s mergers and acquisitions (M&A) market, there continues to be a significant demand for deals due to pent-up undeployed capital and increased interest from financial sponsors. This includes increased interest from sell-side financial sponsors in selling private companies held by their early-vintage funds in order to open up opportunities to launch new fundraising endeavors.

However, in evaluating potential M&A transactions, private companies (buyers in particular) will need to navigate a complex regulatory environment. Regulatory changes from the Trump Administration could spur significant M&A activity but could also create uncertainties that chill interest from buyers and sellers alike. For example, the Trump Administration’s recent approach to trade policy, tariffs, and government subsidies is likely to require both buyers and sellers in transactions to be prepared for regulatory and geopolitical uncertainties in M&A strategy and execution.

This year, we expect to continue to see earnouts incorporated into deals to protect buyers against the risk of overpayment if the target business does not perform as well as planned after closing. Private companies should be aware of the risks associated with earnouts, including legal action due to missed milestones and the isolation of the target’s business from the larger business of the buyer, ultimately delaying buyer’s overall strategy. We are also continuing to see the use of purchase price adjustment escrows, in both representations and warranties insurance (RWI) and no-RWI deals. 

2. The Landscape of Noncompete Bans 

Last year, the Federal Trade Commission (FTC) issued a final rule attempting to ban most US employers from entering into noncompete agreements with employees, independent contractors, and both paid and unpaid workers. The rule was immediately challenged in several federal court cases, and before it could take effect, the US District Court for the Northern District of Texas issued a permanent, nationwide injunction enjoining the FTC’s enforcement of the rule. On October 18, 2024, the FTC appealed the District Court’s ruling to the US Court of Appeals for the Fifth Circuit. While the appeal is pending, the rule has no binding effect.

Trump Administration Implications 

In addition to the challenges facing the federal noncompete ban in court, the rule may be subject to new hurdles from the executive branch as enforcement attempts by the FTC and the National Labor Relations Board (NLRB) under the Biden Administration face headwinds under the Trump Administration. The new chairman of the FTC, Andrew N. Ferguson, issued an oral statement in his capacity as an FTC Commissioner during the Biden Administration dissenting from the FTC’s decision to publish the noncompete ban rule. Additionally, the NLRB’s new acting general counsel, William B. Cowen, already has made employer-friendly changes to guidance issued by the NLRB during the Biden Administration, suggesting the agency may end attempts to assist the FTC in enforcing the ban even if the District Court’s ruling is reversed.

State Legislature Activity 

Despite uncertainty in the courts and a potential shift in executive branch enforcement efforts, state-level restrictions on noncompete agreements remain in effect. California, Minnesota, North Dakota and Oklahoma have near-total bans on employee noncompete agreements, and if passed into law a recently introduced bill would do the same in Ohio. Other states, including Illinois, Virginia, Maine and Colorado, have implemented restrictions on noncompete agreements that fall short of a total ban, but limit the circumstances under which they can be enforced. New York is anticipated to enact a very restrictive bill on employee noncompetes except for highly compensated employees. 

Takeaways

As the question of noncompete agreement enforceability continues to evolve against a backdrop of complex state and federal laws, employers must stay informed. Noncompete enforcement is likely to remain uncertain in the coming years as courts, legislatures, and government agencies continue to erode the legal and policy justifications underlying enforcement. Employers should tailor employment agreements to effectively protect their legitimate business interests without having to rely on the enforceability of a noncompete clause as their sole line of defense. For up to date information, check out our Legal Guide on the FTC Noncompete Agreement Ban, and if you have any questions or concerns in connection with noncompete enforceability, please contact any author or member of our dedicated Trade Secrets, Noncompetes & Employee Mobility team. 

3. Immigration Policy Developments

Consistent with his campaign agenda, President Trump has significantly increased immigration investigation efforts since taking over the White House. Given the president’s explicit focus on immigration compliance and enforcement, private company employers across all industries should expect increased workplace enforcement actions, including US Immigration and Customs Enforcement (ICE) raids and unannounced immigration workplace investigations and more frequent governmental I-9 audits. 

Unannounced Workplace Investigations and Raids 

Private companies should be aware that government officials may appear without notice at a workplace and demand access to personnel and business documents, including conducting private discussions with employees. Employers and their staff should consider the questions below such that the entire office is equipped with answers in the event of an unannounced workplace investigation or raid:

• Does your receptionist know what to say and do?
• Do ICE or other government officials need a warrant or subpoena? 
• Should you hand over the documents requested? If so, does the government get copies or originals, and how can you get a log of what they took?
• Should you let ICE or the other governmental officers who appear speak to your workers? If so, can you be present during interviews? 
• Can you decline such ICE and/or other governmental requests?
• Can ICE other governmental officers roam the workplace without supervision from an employee? 
• Can you relegate them in a less visible conference room?
• Who should the employer contact for assistance and in what order? 

Federal Form I-9 

Each employer must fill out the federal Form I-9 for every paid employee within the first three days of such individual’s employment. To correctly complete the form, employees must present documents from the US Department of Homeland Security’s List of Acceptable Documents to prove both identity and work authorization. Generally, if that work authorization expires, employers must reverify work authorization on the form by inspecting additional acceptable documents before the initial work authorization expiration date.

In response to President Trump’s heightened focus on immigration investigations, private company employers should organize their I-9 records by conducting a proactive internal I-9 audit to correct any and all deficiencies, to the extent feasible. Notably, employers who choose to proactively correct their I-9 records may take advantage of the “good faith compliance” defense under the Immigration Reform and Control Act of 1986. Such remedial efforts can be taken into consideration during a governmental audit or inspection, and the employer may receive credit for those corrections, thereby mitigating potential penalties. 

The ArentFox Schiff Immigration team is ready to provide personalized trainings on these topics for private companies of all sizes and industries, and can offer detailed Guidance Memoranda on both: (1) how to prepare for an unannounced immigration workplace investigation, and (2) how to conduct a proactive, internal I-9 audit. 

4. Class Action Lawsuits, PAGA, and Arbitration Agreements 

The prevalence of class action lawsuits against employers continues to grow, especially in California. In addition to the legal costs associated with defending or settling such lawsuits, class actions can also lead to reputational harm and operational disruptions for companies. Class actions can be centered on several issues, ranging from wage and hour compliance to unfair business practices, among others. Arbitration agreements with employees provide one avenue to preemptively address class action issues, as such agreements can waive class action disputes.

As discussed in our previous alert, actions under the Private Attorneys General Act (PAGA) continue to be widespread for alleged violation of California’s Labor Code despite modifications enacted last year. In a PAGA lawsuit, the plaintiff acts on behalf of the State of California, representing a group of employees who claim to be affected by these alleged violations and seek penalties. A PAGA lawsuit includes both the plaintiff’s individual PAGA claim and a representative claim on behalf of others. Arbitration agreements play a crucial role in reducing liability under PAGA lawsuits. A recent decision by the California Court of Appeals in Rodriguez v. Lawrence Equipment, Inc. ruled that a plaintiff loses standing for the representative claim after a loss in individual arbitration. This is a significant victory for employers and highlights the importance of keeping arbitration agreements up to date.

5. Managing Risk Associated with E-Commerce: Navigating Privacy and Terms of Use Issues 

Privacy Issues – Protection of Consumer Personal Data 

Private Companies should stay up to speed on the many comprehensive data privacy laws taking effect in 2025 as more states aim to protect consumers’ personal data. In January 2025, five new laws became effective in Delaware, Iowa, Nebraska, New Hampshire, and New Jersey. Similar to the other 13 state-level comprehensive privacy laws enacted so far, these laws aim to prevent the misuse of consumer’s personal information, mandate specific privacy notices, limit certain data collection, and grant individuals more control over their personal information. However, there are some notable differences among these laws, which our Data Privacy and Security team has outlined here. Three additional laws will take effect this year in Tennessee (July 1), Minnesota (July 31), and Maryland (October 1, applicable to data processing beginning April 1, 2026). Private companies across all industries should consult the data privacy laws for each state in which they operate and confirm whether updates to their data privacy policies and processes are needed to ensure compliance with the new laws in the space.

Terms of Use 

Website and mobile app terms of use are a crucial way for private companies to mitigate the liability exposure associated with their online presence. Private companies can and should include provisions in their terms of use that, among other things, protect their intellectual property, establish rules of conduct, disclaim warranties, limit liability, and mandate how disputes will be adjudicated. However, poorly drafted or out of date terms of use can leave businesses with substantial legal exposure. 

Increasingly, online businesses face the threat of mass arbitration. Requiring users to resolve disputes through binding, individual arbitration has long been regarded as an advantageous way to avoid class actions and limit litigation costs. Recently, however, plaintiffs’ lawyers, in response to such provisions, have begun filing countless individual arbitrations, resulting in overwhelming upfront arbitration fees for the businesses. Businesses have deployed varying tactics to counteract this threat, such as requiring batched or bellwether arbitration and/or including fee shifting provisions. However, in several cases, courts have declined to enforce such provisions, finding that they unfairly favor the business in the dispute resolution process. Though this remains an evolving area of the law with some inherent uncertainty, private companies should review and tailor their terms of use to address the risk of mass arbitration, while also steering clear of higher-risk provisions.

Beyond the substance of the agreement, a critical threshold question in evaluating a private company’s terms of use is whether the terms actually represent a valid agreement to begin with. Critically, online contracting is held to the same requirement of mutual assent as traditional contracting, and simply placing a hyperlink to the terms of use in the website footer is unlikely to result in an enforceable contract. Instead, users must take some action to affirmatively manifest their assent to the terms of use. While simple in theory, courts closely scrutinize user interfaces — considering factors like font size and the placement and color of hyperlinks — to determine whether there is sufficient evidence of user acceptance. Businesses face similar challenges when seeking to amend their terms of use. It is essential for companies to carefully design their user interfaces and notifications to ensure that they result in an enforceable agreement. After all, even the most ironclad terms of use are useless without an enforceable contract. 

6. The Show Continues: The Corporate Transparency Act No Longer Applicable to US Citizens and Domestic Companies

After an on-again-off-again pause of three months beginning in late 2024, the Corporate Transparency Act (CTA) is back in effect, but only for foreign reporting companies. On March 2, the US Department of the Treasury (Treasury) announced it will not enforce reporting requirements for US citizens or domestic companies (or their beneficial owners).

Pursuant to Treasury’s announcement, the CTA will now only apply to foreign entities registered to do business in the United States. These “reporting companies” must provide beneficial ownership information (BOI) and company information to the Financial Crimes Enforcement Network (FinCEN) by specified dates and are subject to ongoing reporting requirements regarding changes to previously reported information. To learn more about the CTA’s specific requirements, please see our prior client alert (note that the CTA no longer applies to domestic companies or US citizens, and the deadlines mentioned in the alert have since been modified, as detailed in the following paragraph).

On February 27, FinCEN announced it would not impose fines or penalties, nor take other enforcement measures against reporting companies that fail to file or update BOI by March 21. FinCEN also stated it will publish an interim final rule with new reporting deadlines but did not indicate when the final rule can be expected. Treasury’s March 2 announcement indicates that the government is expecting to issue a proposed rule to narrow the scope of CTA reporting obligations to foreign reporting companies only. No further details are available at this time, but domestic reporting companies may consider holding off on filing BOI reports until the government provides additional clarity on reporting requirements. Foreign reporting companies should consider assembling required information and being prepared to file by the March 21 deadline, while remaining vigilant about further potential changes to reporting requirements in the meantime. 

On the legislative front, earlier this year, the US House of Representatives passed the Protect Small Businesses from Excessive Paperwork Act of 2025 (H.R. 736) on February 10, in an effort to delay the CTA’s reporting deadline. The bill aims to extend the BOI reporting deadline for companies formed before January 1, 2024, until January 1, 2026. The bill is currently before the US Senate, but it is unclear whether it will pass in light of the latest updates.

7. Impending Sunset after December 31 of Temporarily Doubled Federal Estate, Gift and Generation-Skipping Transfer Tax Exemption — or Maybe Not? 

In 2025, the Internal Revenue Service (IRS) increased the lifetime estate and gift tax exemption to $13.99 million per individual ($27.98 million per married couple). Clients who maximized their previous exemption ($13.61 million per individual in 2024), can now make additional gifts of up to $380,000 ($760,000 per married couple) in 2025 without triggering gift tax. Clients who have not used all (or any) of their exemption to date should be particularly motivated to make lifetime gifts because, under current law, the lifetime exemption is scheduled to sunset. 

Since the 2017 Tax Cuts and Jobs Act, the lifetime exemption has been indexed for inflation each year. Understandably, clients have grown accustomed to the steady and predicable increase in their exemption. However, absent congressional action, if the exemption lapses, the lifetime estate and gift tax (and generation-skipping transfer tax) exemption will be cut in half to approximately $7.2 million per individual ($14.4 million per married couple) at the start of 2026. That being said, as a result of the Republican trifecta in the 2024 election, it is very plausible that the temporarily doubled exemption may be extended for some additional period of time as part of the budget reconciliation process, which allows actions by majority vote in the Senate (with the vice president to cast the deciding vote in the event of a tie). This is in contrast to the ordinary rules of procedure that require 60 votes out of 100 in the Senate for Congressional action. But there are no assurances that such an extension will occur, and any legislation may not be enacted (if at all) until very late in the year. 

To ensure that no exemption is forfeited, clients should consider reaching out to their estate planning and financial advisors to ensure they have taken full advantage of their lifetime exemption. If the exemption decreases at the start of 2026, unused exemption will be lost. Indeed, absent Congressional action to extend the temporarily doubled exemption, this is a use-it-or-lose-it situation. 

8. Buy-Sell Agreements and Their Role in Business Succession Planning 

The death, disability, or retirement of a controlling owner in a family-controlled business can wreak havoc on the entity that the owner may have spent a lifetime building from scratch. If not adequately planned for, such events can lead to the forced sale of the business out of family hands to an unrelated third party. 

A buy-sell agreement is an agreement between the owners of a business, or among the owners of the business and the entity, that provides for the mandatory purchase (or right of first refusal) of an owner’s equity interest, by the other owners or by the business itself (or some combination of the two), upon the occurrence of specified triggering events described in the agreement. Such triggering events can include the death, disability, retirement, withdrawal or termination of employment, bankruptcy and sometimes even the divorce of an owner. Buy-sell agreements may be adapted for use by all types of business entities, including C corporations, S corporations, partnerships, and limited liability companies. 

Last June, in Connelly v. United States, the US Supreme Court affirmed a decision of the Eighth Circuit Court of Appeals in favor of the government concerning the estate tax treatment of life insurance proceeds that are used to fund a corporate redemption obligation under a buy-sell agreement. The specific question presented was whether, in determining the fair market value of the corporate shares, there should be any offset to take into account the redemption obligation to the decedent’s estate under a buy-sell agreement. The Supreme Court concluded that there should be no such offset. In doing so, the Supreme Court resolved a conflict that had existed among the federal circuit courts of appeal on this offset issue. 

As a result of the Supreme Court’s decision, buy-sell agreements that are structured as redemption agreements should be reviewed by business owners that expect to have taxable estates. In many cases it may be desirable instead to structure the buy-sell agreement as a cross-purchase agreement. 

For further information, please see our article that addresses the Connelly decision and its implications: US Supreme Court Affirms the Eighth Circuit’s Decision in Favor of the Government Concerning the Estate Tax Treatment of Life Insurance Proceeds Used to Fund a Corporate Redemption Obligation. 

9. Be Very Careful in Planning With Family Limited Partnerships and Family Limited Liability Companies

The September 2024 Tax Court memorandum decision of Estate of Fields v. Commissioner, T.C. Memo. 2024-90, provides a cautionary tale of a bad-facts family limited partnership (FLP) that caused estate tax inclusion of the property transferred to the FLP under both sections 2036(a)(1) and (2) of the Internal Revenue Code with loss of discounts for lack of control and lack of marketability. In doing so, the court applied the Tax Court’s 2017 holding in Estate of Powell v. Commissioner, 148 T.C. 392 (2017) — the ability of the decedent as a limited partner to join together with other partners to liquidate the FLP constitutes a section 2036(a)(2) estate tax trigger — and raises the specter of accuracy-related penalties that may loom where section 2036 applies.  

Estate of Fields illustrates that, if not carefully structured and administered, planning with family entities can potentially render one worse off than not doing any such planning at all. 

10. The IRS Gets Aggressive in Challenging Valuation Issues

The past year and a half has seen the Internal Revenue Service (IRS) become very aggressive in challenging valuation issues for gift tax purposes.

First, in Chief Counsel Advice (CCA) 202352018, the IRS’s National Office, providing advice to an IRS examiner in the context of a gift tax audit, addressed the gift tax consequences of modifying a grantor trust to add tax reimbursement clause, finding there to be a taxable gift. The facts of this CCA involved an affirmative consent by the beneficiaries to a trust modification to allow the trustee to reimburse the grantor for the income taxes attributable to the trust’s grantor trust status. Significantly, the IRS admonished that its principles could also apply in the context of a beneficiary’s failure to object to a trustee’s actions, or in the context of a trust decanting. 

Next, in a pair of 2024 Tax Court decisions — the Anenberg and McDougall cases — the IRS challenged early terminations of qualified terminable interest property (QTIP) marital trusts in favor of the surviving spouse that were then followed by the surviving spouse’s sale of the distributed trust property to irrevocable trusts established for children. While the court in neither case found there to be a gift by the surviving spouse, the Tax Court in McDougall determined that the children made a gift to the surviving spouse by surrendering their remainder interests in the QTIP trust. 

11. Ethical and Practical Use of AI in Estate Planning

The wave of innovative and exciting artificial intelligence (AI) tools has taken the legal community by storm. While AI opens possibilities for all lawyers, advisors in the estate planning and family office space should carefully consider whether, and when, to integrate AI into their practice. 

Estate planning is a human-centered field. To effectively serve clients, advisors develop relationships over time, provide secure and discrete services, and make recommendations based on experience, compassion, and intuition. 

Increasingly, AI tools have emerged that are marketed towards estate planning and family office professionals. These tools can (1) assist planners with summarizing complex estate planning documents and asset compilations, (2) generate initial drafts of standard estate planning documents, and (3) translate legal jargon into client-friendly language. Though much of the technology is in the initial stages, the possibilities are exciting. 

While estate planning and family office professionals should remain optimistic and open about the emerging AI technology, the following recommendations should be top of mind: 

• First, advisors must scrutinize the data privacy policies of all AI tools. Advisors should be careful and cautious when engaging with any AI program that requires the input of sensitive or confidential documents to protect the privacy of your clients.  
• Next, advisors should stay up to date on the statutory and case law developments, as the legal industry is still developing its stance on AI. 
• Finally, advisors should honor and prioritize the personal and human nature of estate planning and family advising. Over-automating one’s practice can come at the expense of building strong client relationships.