If you've ever done business with family chances are you know how difficult it can be to maintain the harmony and preserve the original relationships.
Family businesses can be tricky to perfect because a lot of the time the owners go into it with no real indication of what to expect when the business is operating and what will happen in the instance the business becomes successful.
There are a range of different mistakes that can become complicated legal issues in a family SME so we've sourced the four most common mistakes that are made.
Document investments and share
When starting a family business only in rare situations will all members be capable of contributing an equal investment to get the ball rolling. It's a good idea to establish who has invested what, and how much their ownership of the business will be. Some families will opt to simply have equal ownership regardless of the shares, but the main thing is that you clearly define this from the beginning to avoid potential arguments should the business become successful.
Not defining roles and employment hours
Starting a family business is a great way to spread the funding but a lot family businesses can suffer from ill-informed roles leaving one person to pick up majority of the work. If you're planning on becoming involved in a family business make sure you know exactly what each member will contribute from the very start.
This doesn't mean everyone has to be involved in the business operation, but by defining the roles of each member early on you determine the expectations of those involved in the business.
Going to court
The last thing you want is to put your business and family under strain by forcing an issue into court. Even most service lawyers will advise that as an SME owner the cost and time needed for a court case isn't worth the effort. Rarely will you seek the results you want from court and when family is involved it's even less likely to benefit your situation because long term relationships can be damaged as a result.
No clear succession plan
Although many small business owners and partners don't like to think about it, your business needs to address what will happen in the instance you are a hurt or pass away.
You should identify early on who will run the business if you no longer can. Spend time with the person you aim to be your successor and try to make them familiar with the business operation from the very beginning. Once this is done you can acknowledge their role as a potential successor to others and make it known in the will.
Haven't started a family business yet but considering it? Learn about the basics here!