Family Businesses and Legal Issues - Planning a Family Business

Family Businesses

Family-owned businesses are an interaction between two separate but very connected groups: the business and the family. This interaction leads to special concerns for family businesses that do not occur in other businesses. Legal counsel is crucial for assisting family-owned businesses through these delicate issues. Murphy Desmond has business lawyers that have handled a variety of family business matters, from entity formation and solving disputes, to succession planning and transferring the business to the next generation.

Some basic guidelines can help with the success of your family business.

  • Create governing documents. Governing documents set the ground rules for the operations of any business. The particular governing documents vary depending on entity formed, but generally set forth the ownership, fiduciary responsibilities, liabilities, decision-making powers, disability or death decisions, and other important operational matters.   
  • Open and regular communication is key. Family members should meet on a regular basis to discuss the business issues. Avoid having impromptu business meetings at social or family events. Often, family businesses will participate in an annual retreat to discuss the goals for the business. Open and regular communication may help prevent possible problems from arising in the future. 
  • Decision-making process. When decisions must be made and there is no hope for unanimous agreement, the business must have a documented decision-making process. The inability to effectively make decisions will make any business stagnant. It is important to have rules for decision making in your governing documents.
  • Establish clear rules. Conflict management is of particular importance since disagreements at work carry over to the dinner table. Policies concerning the management of the operations, including compensation and responsibilities, should be documented in bylaws, operating agreements or employment agreements. 
  • Agree on the business’ future. The strategic vision of the company may change as it grows. Perhaps the business that was once run solely by family members will need to hire outside help. The future of any business needs to be discussed and plans reviewed regularly, as the economy, technology, family responsibilities and other considerations can change frequently. Our business lawyers can help you with a strategic business plan.
  • Succession planning. Careful succession planning is required to pass the business to the next generation or to a third party. This planning must include maximizing the value passed to future generations and confirming that the future leadership is ready for the challenge. 

Like any business, those in charge may choose to leave a business, sell out or transfer their ownership to another party. Personal situations like marriage, divorce, disability, illness, relocating your residence, and death are just some of the many conditions that can affect the original plans for a family business.

The business lawyers at Murphy Desmond S.C. can help you with legal documentation and guidance to ensure your family business will run smoothly in good times and in bad.