Conflicts in the Family Business

Last week in Phoenix, Arizona five people lost their lives in murder-suicide that started as a dispute over how to run a family business. While most business disputes don’t turn deadly, personal conflicts often cause problems in the family business. Is everyone pulling their weight? Is someone being treated unfairly or shown favoritism? Is the business being forced on an unwilling child? These are places where tensions can erupt into more serious disputes. By being proactive in planning for your family business, you can help minimize the areas of dispute or at least address them early before they become a larger problem. Remembering that the business should be operated on business principle as opposed to family principle is a great place to start. I suggest putting in place an ownership agreement that addresses among other things:

• What are the roles and responsibilities?

• How decisions are made?

• How directors are appointed?

• How profits are distributed?

• What are the restrictions on the transfer of ownership interests?

• What are the restrictions on the employment of family members?

• How disputes are resolved?

Business Building

Family businesses are unique and have dynamics that don’t exist in other businesses. Take time to plan pre-emptively and avoid the ugly disputes that can ruin the family in the family business.