Legal Issues in a Family Business
A family business can be the best and worst form of an enterprise! If done well, it can turn into a profitable business that benefits the whole family, but if handled badly, it might feed lawyers (and starve the family) for years.
The legal issues in family business originate from the family relationship – informal. Thus the family business that often starts as a hobby may stay undefined in many ways even when it outgrows the family home.
If you want your family business to last and thrive, you need to look into these 5 legal issues in family business:
- Employment - The biggest issue here is contracts – while outside employees will have signed employee contracts, family members often don’t. When issues arise, this can be a major issue. Ensure business contracts are in place for all family members
- Business structure - With a family business, it is important to choose the right business structure. This is vital as it will acknowledge everyone’s contribution, protect the family estates and ensure that you are dealing lawfully with other businesses
- Licenses and permits - Is the family member doing your tax and accountancy qualified? Did you ever bother to get the license that you need? Licenses and permits are important for your business and for the people who operate it
- Planning - Adequate planning is key so you know which direction your business is going. Make sure everyone knows who is going to run the business in the long run and how succession planning will be handled
- Money - In many family businesses the finances of the business and the family are one and the same thing. This is often the cause of a lot of conflict! The earlier everyone agrees that family and business finances must be kept separate, the easier it will be. Ensure that each contributing member of the family is given a salary that best represents their work or share in the business.
In conclusion, treating your family business more like a structured organisations will set you up for success and input into its sustainability.
(Story courtesy of ABIS)