We often hear stories about the difficulties of making a family business partnership successful. Yes, there are unique hurdles that differ from other types of business models, but with the right attitude and a sincere willingness to share in the responsibilities, family business partnerships can and do work—all the time.
Here are things to keep in mind when contemplating your own family business venture:
As with any business partnership, it’s vital that the individuals involved share the same vision and values for the planned enterprise.
“Don’t write the first word of your business plan until you know that you and your partner share the same dreams, goals and vision for your new business,” advises SCORE, a business mentor network. Conflicting visions and values will, in all likelihood, make things more challenging to overcome, and lead to further conflict down the road.
A family business can be structured in a variety of ways. Options include a general partnership, limited partnership, limited liability partnership, C corporation, and S corporation. Each of these structures has its pros and cons and should be viewed in light of your own specific circumstances. This is a good topic to explore with a legal specialist or other trusted advisors.
While some family business owners may wish to let roles within the organization become clear over time (and depending on how well family members handle these roles), it’s more efficient to define business roles at the outset.
If you don’t do so, “you may end up blurring the lines of roles, and team members may not know who is supposed to do what,” notes StartupNation. Most importantly, “always keep roles separate” between family members.
It may seem like family members can move forward with a business partnership purely on the basis of their amicable relationships. Wrong! Experts advise again and again to put everything about the business in writing.
An effective written agreement outlines:
Having all of this in writing (as opposed to waiting until a problem occurs) represents a huge step forward in effectively managing a family business partnership.
This may be among the toughest actions to take, but it’s absolutely essential to surmount any emotional parts of the family business. The venture can only work if everyone involved agrees to be sensible and realistic about the challenges ahead. Otherwise, emotions and “family baggage” can creep in and derail the business before it ever gets off the ground.
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Relationships between any business partners should be as honest and above-board as possible. It’s even more crucial with a family business partnership. Without straightforward and transparent communications, things can go very wrong, very quickly. Prospective partners should commit to a relationship where disagreements can be aired and addressed, without people becoming embroiled in feuds or other debilitating conflicts.
As we have noted before “Family business challenges can seem insurmountable at times, but sharing the business ownership experience with your family members can be a very enriching experience.” The process requires diligence and commitment. After that, the sky’s the limit!
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