Family operated businesses serve as the backbone of Minnesota’s overall economy. The vast majority of businesses in the United States are family-run operations. Roughly 80 to 90 percent of all business operations across the country are family businesses, according to the Family Business Alliance. About one-third of the S & P 500 are family-run ventures.
It may seem easy to have a discussion with a sibling, or your parents, over dinner in the family home about building a new company. Married couples who have managed the household together often see opening a restaurant or other business as a natural progression that will be based on mutual cooperation. However, when opening the doors to a new venture, it is important to take steps to help the business grow and prosper. In a family setting, sound business principles can be the difference between business success and failure.
Creating A Comprehensive Plan for Running Your Business
Co-owners of small businesses often have to be involved in the full-range of business decision that impact the company. However, it is a good idea to put together a forward-looking plan to determine who will take care of many of the duties required to operate the business. Detailing the primary roles of the stakeholders can allow you and your partners remain focused on a streamlined operating plan.
Put The Details In Writing
Whether you form a limited liability company, a corporation or any other type of business organization it is important to create written documents memorializing the agreements you make with co-owners. Putting the details in writing will help to avoid disagreements about what you originally intended as how your company will function. For some families, that may mean specific arrangements to allow for a co-owner to take care of parenting duties, determining fairness for hours worked versus financial investment in starting up the company and other considerations that may be forgotten or change over time.
Create A Detailed Process For Business Decisions Within The Company
These decision-making plans should be in writing, and you may include a formula or plan for any future amendments to change the process as the company grows. Details about decision-making authority are often overlooked, leading to disruptive internal business disputes that can harm an otherwise successful business.
Do Not Overlook Business Succession Planning
Create a plan to transfer shares or interests in the business, including a full-business succession plan. It is far too easy to avoid, overlook or delay putting together a solid business succession plan. However, change may come earlier rather than later and being prepared from the start can help to avoid family disputes.