With the holiday season fully upon us, we may look forward to all of the upcoming family time (or maybe not). Regardless of your love or apathy for dinner with your parents and siblings, this time of year is the perfect time for having those discussions that are best had face-to-face. If you have a family business or if your family is considering business ownership – then there are some very important conversations you need to have. This is part two of a two part series that will highlight what your family needs to be talking about.
Are you thinking about buying a business with a family member or a business the whole family can run together?
If you are thinking about buying a family business, you should be talking about written agreements.
First and foremost, the business has to be right for everyone. There is nothing worse than having a member of a family business who hates what they do. They take that resentment home with them everyday. As such, your initial discussions need to be open and honest – and everyone who will be involved needs to be heard. You don’t want to end up with the ultimate disgruntled employee.
Also, figure out who is the boss of who from day one. Clarification of each family member’s role within the business is critical if you want to keep bickering at bay and morale up. Once you have this decision in place, it needs to become part of the written agreements between the family members involved.
The second and also very important part of the written agreement needs to answer the question “Who owns what part of the business?”. It is rarely the case that each member of the family brings the same amount of initial capital for the purchase of the business, and this uneven ownership can get very hairy if one member of the family decides they want to sell their portion and move on. You absolutely must have agreements in place that determine how you would value the business if some kind of split or buyout has to happen in the future, as well as determining the percentage owned by each family partner.
Family businesses can be an amazing opportunity, but the mixing of family, money and business can be a dangerous cocktail. It is absolutely critical to the survival of family relationships that agreements are in place long before the decisions need to be made and that every family member is truly on board.
Are you considering buying a family business and want to know more about what types of agreements need to be in place? Have you already put agreements together and have advice for those just starting out? Please feel feee to leave a comment or question here.
Want to read part 1: Buying Or Selling The Family Business – Part 1: The Exit Strategy? Click here.
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