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Things to consider when forming a family businessBy Jill Wood
A. Working as a family has many advantages. Much of the time-consuming formality is removed, people understand one another better, and communication tends to be more direct than with unrelated peers. You may share many of the same goals. There may be more flexibility than in a "normal" work environment; if you come in an hour late, you're not likely to be fired. But working as a family can also come with some pitfalls, such as a reluctance to change and a tendency to mix personal and business issues. If you do decide to engage with relatives, here are some things to consider. Who is in control? Who owns the business, and who is legally the boss? Make sure your corporate structure (i.e. are you a partnership, an LLC, etc.) is appropriate, reflects what you want, and protects you and your family from personal liability. Are all key arrangements and agreements in writing? Resist the tendency to fall into informal arrangements that could result in conflict. Who is in charge of what department or task? What are people's official titles and performance expectations? Spell these out. Who is good at what and what gaps do you have as a family? Are you all product visionaries but not good at sales, or are you all power salespeople with few product ideas? If so, you need to fill those gaps with outsiders. In any case, it's best to have some outsiders involved; otherwise, you may suffer from tunnel vision or a siege mentality borne of natural protectiveness of your family members. What personal/family assets, if any, are you willing to commit to the business? What level of risk is the business willing to assume? If you are a married couple, for example, will one of you keep your "outside" job to hedge your bets or keep income flowing? How is work separated from home life? You may want to pick an hour after which business will not be discussed, and to try to establish some regular days off or weekends, although that is not always possible, especially in the early stages. Where will the work be done - at home or at an outside office? What benefits will the business provide? Can the company afford health insurance for the family members and other employees who work there? What about workers comp and retirement issues? Work with a corporate lawyer, preferably one with experience with family businesses, to make the business as "normal" as possible in these regards. Who is going to inherit the business? Spell that out contractually and make sure all parties understand the arrangement. Who is going to run the business in the future? A family member, or an outsider best qualified for the job? Julie Wood is Business AnswerLine coordinator for the Wisconsin Small Business Development Center. madison.com ©2009 Capital Newspapers. All rights reserved. |
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