Family businesses and other closely held businesses require each owner to consider his or her personal interests in the ongoing business.
Several family businesses have been in the news lately. As the events play out, we are reminded that is important for each individual family member to consider the responsibilities and limitations of “ownership” in a family business.
The relationship among owners in family businesses is complex. Very often ownership moves from one generation to the next. As the ownership changes, each owner’s interest changes. Some of the questions that need to asked are:
- Who is going to run the company?
- Do all owners want to actively participate in the company, or do some simply want a reasonable return on their investment?
- How do you protect the interests of owners who don’t work with the company?
- How do you assure that the owners who work at the business have the appropriate power to operate?
- How do you provide liquidity in the event an owner needs to liquidate?
- If you have a buy sell agreement, can you provide different prices for different events?
Organizing a family business to be flexible and protect the interest of owners as they change is a complex matter. Sometimes it is overwhelming. However, it is important to make the first step. Start with the easy problems and tackle them one by one.
At Welts, White & Fontaine, P.C. our lawyers have experience with representing families and closely held businesses. We have balanced business plans with family plans and we can help you develop strategies for a successful family owned business.