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Is This Your Situation: Facing Problems in a Family-Owned Business


Even if your company is going strong and is profitable (or on the way to being profitable), you still may need to address some important management issues to ensure that the workplace is civil, and even better, joyful.

As Inc. contributor Carolyn M. Brown explains, "Conflicts are a part of a normal experience for many small startups and family-owned businesses. But even more so when those businesses don't follow a formal management structure that encompasses standard policies and practices."

That's why she recommends following these DON'Ts for small-business owners who employ their family members:

  • DON'T create a two-class system: Don't classify your employees as "family" and "nonfamily," even in your own head. Giving family members privileges that nonfamily members don't get can result in unhappy employees and high turnover.
  • DON'T reward or punish someone because they're related: If others face consequences for doing something wrong, family members must face the same consequences. By the same token, in the workplace, don't go by the old adage "you always hurt the one you love." When all is said and done, if feelings are hurt, it could be your company that suffers the most.
  • DON'T keep your family relationships a secret: Always be honest and aboveboard with nonfamily employees about identifying who the family members are. Otherwise, when it eventually comes out (and it usually does), the nonfamily workers will feel deceived. And it might make them wonder what else you are being deceitful about.

Of all the important DOs in a family business, one is most important: DO create an operating agreement if you own an LLC with one or more family members. An operating agreement is like a prenup. If you're happily married, you don't really need it. But if you're getting divorced, it's a life preserver. It states, in writing, important things such as percentage of ownership and each owner's rights and responsibilities in the business.

According to the U.S. Small Business Administration, family-owned businesses account for 90 percent of all businesses in America. But that doesn't mean they all run smoothly. To get your family-owned business off on the right foot, or to get your family business back to the harmonious way things ran at the beginning of your venture, give us a call. We can provide advice that's tailor-made to your particular situation.


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