Here’s What You Need to Know Before Starting a Family Business

Legal AdviceMarch 7, 2021

Yes, we can see how attractive the prospects of starting a family business are. You’re working for yourself, earning more than you would at a regular job, hiring family members who you trust, and you even have something on to future generations! You’ll hire your children as employees who will earn both the experience and income that comes from working for your family. Before you know it, they’ll be fully trained and ready to take over, so long as you’re ready to hand over the reins.

Deposit Photos | You’ll be securing your child’s future by teaching them the business

All that be as it may, you’d time have to put in the time and consideration a venture demands. Before jumping in headfirst, take note of the following pointers, and thank us later.

Laying Out a Business Plan

The first step to starting a business is finding legal, business, and tax advisers you trust, who will be part of the business plan development process. The plan should be put down in writing and given to all concerned parties to promote transparency.

Deposit Photos | Consultation is essential for things to run smoothly

It should consist of the following things:

Defined Roles – Each member of a family should be listed to have a role and what the role entails. Ensure that the chain of command is clear, with all parties in an agreement.
Ownership Stakes – Before opening, lay down the ownership stakes for each member. This includes whether or not they’ll be working on a salary basis and its amount. Note down the percentage each member is liable to receive upon the sale of the company. Additionally, what will the voting rights look like?
Succession Plan – In the event that the company is successful, determine who will be taking over the topmost position once retirement is inevitable.
Exit Plan – What happens when someone decides to leave, especially if that person has contributed significantly to the company’s success? What are they owed? Write it all down.

Setting Ground Rules

It’s very simple to get work mixed and messed up due to familial relationships, so you need to set a list of ground rules before starting. Some of these are very obvious yet important to be clarified right from the start. For example, one rule should be to always keep work and personal lives separate. Another could be for the youngsters not to expect a job whenever they need it. While families are meant to look for each other, the company’s best interest should remain a priority to keep it successful.