We spend a lot of time discussing issues that arise within family businesses and how to fix these issues. However, we never really discussed what makes a business a family business, as opposed to any other type of business. It is time to get back to basics and understand what exactly a family business constitutes. We will explore the definition, the idea of hierarchy, and even possibly answer some basic questions, such as the legal structure of a family business.
By Definition
By definition, a family business is one in which multiple generations of one family are involved in the ownership and management of the business entity. These businesses employ nepotism as a basic business principle, and that is not a negative idea. Almost any type of business can be a family business. The business may be registered as an LLC, S-Corp, C-Corp, Partnership, or Limited Partnership. The key idea is that family members are intimately involved in running the business. These family members may be owners, managers, and even employees. They are in it together and building a legacy.
The Issues
It has been said over and over again: avoid mixing business and pleasure. Yet that is exactly what a family owned business does. It breaks the number one rule of business by mixing business and pleasure. This is the number one issue many family businesses face. They have difficulty taking the family out of business and the business out of the family. It goes beyond just management and ownership. Business owners are going to disagree on certain things. However, when the owners are brothers, husband and wife, or father and son, the argument can easily leave the boardroom and come into the living room. This is only one potential issue with family owned businesses.
Another potential issue is the issues involved with taking time off, hiring and firing, and basic human resources issues. Family owned businesses do not always adhere to the norms of the general business world. First, many families choose to hire family members and friends to aid in the daily functions of the business. This should be avoided when possible. However, it does still occur regularly. When hiring family and friends to be employees, the expectations must be clearly stated. Your employees must know where they stand with vacations, benefits, and even their employment status. If they do not fulfill their work responsibilities, you may be left with the uncomfortable choice of having to fire a family member or friend. You must be prepared to address all of the issues – including the awkward family dinners. Remember, just because the employee is family does not mean the employee can get away with murder.
Owning a family business requires intensive planning and clear boundaries. Issues can arise in any business. However, when you leave the business for the evening, you generally do not have to see that person until the next work day. This is not always true for family owned businesses. However, the benefit of entering into this type of business is that you know you can trust your business partners. After all, you will have to live with each other! To learn more about setting up a family owned business and creating a plan for the future, contact the experts at Hubler for Business Families at (612) 375-0640.
Another potential issue is the issues involved with taking time off, hiring and firing, and basic human resources issues. Family owned businesses do not always adhere to the norms of the general business world. First, many families choose to hire family members and friends to aid in the daily functions of the business. This should be avoided when possible. However, it does still occur regularly. When hiring family and friends to be employees, the expectations must be clearly stated. Your employees must know where they stand with vacations, benefits, and even their employment status. If they do not fulfill their work responsibilities, you may be left with the uncomfortable choice of having to fire a family member or friend. You must be prepared to address all of the issues – including the awkward family dinners. Remember, just because the employee is family does not mean the employee can get away with murder.
Owning a family business requires intensive planning and clear boundaries. Issues can arise in any business. However, when you leave the business for the evening, you generally do not have to see that person until the next work day. This is not always true for family owned businesses. However, the benefit of entering into this type of business is that you know you can trust your business partners. After all, you will have to live with each other! To learn more about setting up a family owned business and creating a plan for the future, contact the experts at Hubler for Business Families at (612) 375-0640.
RSS Feed
