Give Your Family Business 4 Cornerstones That Will See It Endure Through the Generations.
If you’ve managed to make your family business work, you know that the relationship dynamics have their upsides and downsides. But do you know what unique pitfalls await you on the path ahead? Here’s what you can do to avoid the four big ones.
Separate family and business finances
Ours is a litigation-prone society.That means you will receive not only more complaints from individual customers, but they may sue you for all that you are worth, as well. For that reason, put protection of your personal assets on your priority list.
By forming a legal entity with liability protection, your business accounts are wholly kept apart from your family’s personal savings, often leaving creditors little room to move against them. Without this, the assets of every investor/owner will be at risk.
Get a business license
Whether required by the local, state, or federal government, the consequences of operating your business without a license can be devastating. Everything is on the table, from hefty fines up to and including a mandate to shut down. Depending on the type of license and the grantor organization in your community, you risk being barred from even seeking a license for a period of months or years.
Partly, the hefty consequences stem from the idea that you should know better. Indeed, the majority of city halls or county government offices can guide you through the process and inform you of precisely what sort of license you need to operate legally.
Document, document, document
Employing family members can pose unique challenges, particularly if you bring on those outside your immediate family—cousins, nieces, and nephews. Too often, owners of a small family business will slip into an informal relationship with his or her employees. By forgoing the documentation—employment agreements, contracts, etc.—the process of terminating a relative who has turned out to be a poor fit can be a challenging one.
Chart a course
You must have had some dream of where you would end up when you built your business from the ground up. Whether you aimed to sell the entire thing off and finish out your days sitting on a tropical beach or simply keeping at the job you love long after everyone else has lain down their burdens, it is vital for you and your family to have a succession plan in place well beforehand. Particularly as we never know what life will hand us, you must prepare your business for the eventuality that you will no longer be be there.
A clear game plan to follow will save your family a great deal of added grief. Make sure you communicate the path you’ve charted to those family members who have taken on the greatest responsibilities in the business.
What you can do
If you’re the owner of a small or mid-size family business, call us today at 612-206-3701 or reach out via our online contact form to schedule a consultation appointment.
Image courtesy of Sarah Pflug