The Pitfalls of Being In Business With Family Members

Working with family members can be a very tricky task. This happens when you mix personal relationships with work relationships. There are all types of problems that arise with family business relationships: marriages, divorce, battles about the job, control over shares, and decision making issues. The business can actually be at risk for possible losses if the family members are no able to get along.

The following are various pitfalls that occur with any family business situation:

Poor Documentation

The most common mistake between family businesses is that they fail to make a formal document about the terms of their business arrangement. Many business owners assume that when they are dealing with family members that they can trust that a written agreement is not needed. Other people are afraid to bring up the issue of a written agreement due to the fact that it might insult the other person or imply that they do not trust them.

While these concerns do happen, it is important to document all agreements so that there is no chance of future problems arising that could hurt both the business and the family relationship. Without a formal agreement, the business could be at the risk of the Corporations Code, which will be an unfavorable decision for both parties.

You should document the agreement at the beginning of the business relationship because this is when both people are working to meet a fair bargaining arrangement. The agreement can be finalized at any time, but if you wait too many days, this could create problems.

Ignoring Responsibilities

Whether the family members are partners in the organization, directors of a corporation, or managing members, each of these titles has a trustee obligation. Meaning that the owners have to act in the best interest of the business and treat other owners fairly as far as business dealings are concerned. This duty applies, no matter the type of dispute, or the behavior of the other person.

When family members who are in business together become involved in a dispute, it is common for them to believe that they have the right to take advantage of the other person due to some fact or event that occurred. Ignoring the fairness granted to each owner does not look good on the person who is acting in this manner. They could be subjected to damage claims and the government will grant this.

Failure to Plan for the Future

Another pitfall that occurs with any family business situation is the failure to plan for the future. Many families dread talking about the future and making any concrete plans for the fear of stepping on anyone's toes. This could involve who the company should go to after a person dies or any future mergers. Either way, this is a serious matter and the business owners should put just as much time into the future of their business as they do their own personal estates.

All of the pitfalls listed above are common and they will happen. The only thing that you can do as a family and as a business owner is to seek the best solution for each issue. Not only will you be able to better manage your business, but you can prevent any unfortunate events from happening. Most importantly, it is important to understand that with family you will have problems, but the proper documentation will protect each person.


Chris Simpson is dedicated to helping people find honest and legitimate work at home and home based business opportunities. Find legitimate work at home jobs, home business opportunities, articles, and resources to help you successfully work from home and make money online today at:

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