Things To Consider Before Starting a Business with a Family Member

Setting up a business and building your own brand is a tough and risky game. To not hesitate and put your best foot forward with confidence, you need a team that has your back every step of the way. And who better to be your support system than your family, right? 

Unsurprisingly, when starting a business, many entrepreneurs turn to their family members for assistance and support. Family-owned businesses have been around for years. Even today, some of the biggest names are family-owned.

Yet, before approaching their family with their business proposition, every business owner faces a dilemma—can personal affection and trust translate into professional solidarity just as smoothly? 

Things To Consider Before Starting a Business with a Family Member

Let’s put your fears to rest. Yes, including your family in your business can be the best thing ever – provided you sincerely evaluate a few points before you take the leap of faith and start a business with a family member.

Set Clear Ownership Roles and Responsibilities Among Family Members

Every family has its own hierarchical structure where every family member naturally assumes a role. However, in the professional space, this hierarchy is different. You are the owner and have the final say in each business matter. This change in role could be difficult to understand and adapt for your family at first. Keeping that in mind, it’s always better to clearly outline each member’s role and responsibilities in the business from the beginning. It can be a tricky business as you must tactfully set boundaries to avoid interference in each other’s work while also ensuring each family member feels secure in their assigned designation.

Details such as the exact nature of responsibilities, remuneration, terms and conditions, if any, must be discussed and documented to avoid resentments later. Taking advice from an expert is recommended to sort out the documentation and other legal nitty-gritty. Such clarity in the corporate structure helps set clear communication channels while making each member feel respected and valued.

Divide Responsibilities As Per Every Family Member’s Strengths

Even in a family, different members have different talents. While someone might be a natural leader, somebody else might be the most resourceful, and another member might have impeccable social skills. All these skills are desired in a business where decision-making, advertising, looking for suppliers, and more are important tasks. By carefully evaluating the natural strengths of each family member, you can assign them to specific areas in the company where they can outperform and shine in their designated roles. Such division of work also keeps their minds focussed on their jobs and reduces interpersonal friction at the workplace.

Personal vs Professional

The best part about working with your family is that they are your biggest cheerleaders. Bringing the same camaraderie and motivation to the business will help its all-round development. Sharing your knowledge, views and observations will give your business a competitive edge among peers. 

However, there can also be disagreements and differing views over business matters. In the home space, you probably fought and made up often over little things in the past. But the same does not work in the office. It is necessary to understand this well and resolve disagreements logically and not emotionally. Assess the facts and weigh the available options before deciding instead of being influenced by your personal equation. Though great to hear, the mantra of “keeping personal and professional separate” is difficult to follow. To ensure you don’t bring professional clashes home and vice versa, you must maintain transparency and effective communication with your family.

Always remember each of you is ultimately working in the business’s best interest. 

Plan For the Future

While you would love to have an idyllic “Family Forever” bond, sometimes things don’t go our way. We don’t know what the future holds for us as a family and a business. While we may ponder family problems emotionally, business problems must be handled logically and precisely.

Hence, it is better to plan for both circumstances, i.e., whether the family stays together or happens to break.

In the first (and more desirable) case, it all boils down to planning for future generations to join the business. A succession plan needs to be created, which details which family member gets what share, who will lead and mentor future generations, and how business ownership will be transferred. The succession plan lays the groundwork for the day the next generation takes up the reins of your business.

But if things don’t go right and personal issues crop up within the family, or life events like marriage, death, or divorce occur, you should also be ready with a plan to divide assets. Family issues can negatively influence your business and damage your professional image. While painful, it is necessary to plan for such unfortunate circumstances in advance so that issues do not escalate and affected family members can exit the business amicably.

A business consultant can guide you on the best action for tackling such contingencies. 

Don’t Hesitate to Ask for Outside Help

Between you and your trusted family, you can iron out most business problems. But that does not mean you cannot call for professional help, especially for taxation, audits, and legal matters. Wherever necessary, talk to your family and convince them to consult an expert who can guide your business in the right direction. 

Thorough planning cannot protect you from business challenges and contingencies but can prepare you to handle them efficiently and make a family-run business a reality. 

Contact DDL & Co. in St. Catharines to Set up Your Business Structure 

A professional business consultant is experienced in handling family-run businesses and the possible challenges that could come with it. A skilled consultant can help you set up a business structure, shares, ownerships, and responsibilities that are best for your situation. To learn more about how DDL & Co. can provide you with business consulting services, contact us online or at 905-680-8669.