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INFORMALITY
For public companies, corporate cleanup typically is not much of a problem. Because they are required by the federal securities laws to make quarterly and annual reports to shareholders, they must have documentation in place to ensure that the company is properly running the operations. However, this is not so with privately held companies, which may be run a little too "informally." For instance, the founder may be using the corporate cash account for personal reasons or failing to record certain types of contracts. Problems such as those can literally scare away buyers.
If your company has been run informally for a long time (say, more than five years), it could require a lot of time and expense to correct the situation. And the decisions can be wrenching: You might need to lay off people or remove a loved one from the board of directors. Despite the psychological fallout such steps likely will produce, they may be required to ensure you do the right thing for your company.
