Often family businesses are set up without many of the formalities and processes that non-family owned businesses would implement. After all you’re members of the same family with a common vision; why waste time on paperwork and unnecessary administration when you could be concentrating on growing your business? What could possibly go wrong?!
However as time goes on businesses evolve, participating family members change and, in some cases, disagreements happen. All too often people come to Hedges after a family fall out and when relationships have already become strained. Whilst we can of course assist with disputes, issues might have been avoided with a little more planning and thought earlier on in the life of the business.
Here are some things you should consider now to pre-empt problems in the future:
1. Succession planning - how and when will you involve the next generation in your business? What if they don’t want to become involved?
2. Management/control – how will decisions be made when the business grows and more people become involved? Will you be able to relinquish enough control to enable younger generations to “have their say” and really engage with the business?
3. How will you resolve disagreements?
4. What is the overall vision for the businesses? Whilst the family members who were involved initially may have been clear on the direction in which their business was going times change, businesses grow and it is necessary to adapt. Newer family members may have different views on what the future holds and it is sensible to regularly review and agree common goals.
Often clients find these questions difficult to answer. The problem with leaving them unresolved is that they become even more difficult and in the interim younger generations of the family may decide not to enter the family business because they can’t see a place for themselves. In fact, once you’ve done the hard work in deciding how you would like your business to evolve it can be relatively simple to formalise the position in, for example, a shareholders agreement. There are always different options in term of structuring your business and ensuring that all those involved are properly rewarded and remain committed to growing with the business. A little hard work now can save a lot of headaches in the future!
During October/November the Hedges’ business services team is offering a free, no-obligation, business health check at which one of our solicitors will sit down and go through an issue of your choice with you to see if there are potential solutions we can suggest. To take advantage of this offer please contact me on Vicky.email@example.com or 01865 594 276.
it can be awfully difficult to distinguish between business matters and personal matters in a family business. According to Jerry Gluntz, general manager of Louis Glunz Beer, a beer distributor in Lincolnwood, Illinois (founded in 1888 by his great grandfather), mixing business and personal matters can be a major mistake when running a family business.