All in the Family
By Jill D. Laney
Family businesses face special challenges. A trusted legal adviser can help the family focus on issues that contribute to the longevity and success of the company.
Here are a few of these issues:
Consider the continuity of management and ownership. Family members tend to operate informally, but because memories fade and recollections differ, this may result in difficulties down the road. The family should be encouraged to discuss the continuity of ownership and management of the company and to record their agreements in writing. This provides a road map to guide the continued success of the business.
Seek the advice and counsel of nonfamily advisers. The old adage that “it’s difficult to see the picture when you’re inside the frame” is especially true in family-owned businesses. Family dynamics can make it hard to take a step back and evaluate the business objectively. Counsel from a non-family adviser is invaluable. Some families seek this outside counsel formally, by electing a non-family member to the board of directors or by placing him or her in a key management position. Others seek advice more informally through a trusted adviser, such as an accountant or lawyer.
Resolve disputes early. Disputes between co-workers exist in every business, and family companies are no different. For them, a breakdown in a working relationship results in losing the trust and respect of not only a co-worker, but a sibling, parent or child. To guide them through their differences, some families have a member who is a natural mediator, while others require outside assistance. In any event, irreparable harm can be avoided with early resolution.
Benefit from regular checkups. Family business owners should take the time to engage in periodic review of the company’s business practices. A comprehensive review involves examination of a broad range of areas, such as insurance coverage, hiring and employment practices, sales and warranty issues, advertising, and intellectual property protection.
Make individual estate planning a priority. It is likely that a family member’s largest asset is his or her ownership interest in the business. Individual estate plans should be consistent with relevant corporate documents, such as the buy-sell agreement, and adequate attention should be paid to tax-planning issues. The press of business often results in estate planning being moved to the bottom of the priority list. To ensure that the business owner’s estate is in order for his or her spouse and children, it is essentialthat a comprehensive plan be considered, documented and regularly updated.
Consulting legal counsel on these and other important issues can help a family business focus on the unique aspects of their company, fostering family relationships and ensuring the continued success of the organization for generations to come.