Running a family business is the most natural thing in the world–and the most unnatural. Handle it well, and it can make you rich, capitalize on bonds no ordinary colleagues could share, and keep your family employed for generations. Handle it badly, and it can instead keep lawyers employed for generations.
If you have a family business, then a recent article in Inc. magazine is a must read to avoid unaffordable mistakes. In short, these mistakes can kill your family business.
The Inc. article is titled the “4 Worst Legal Mistakes a Family Business Can Make.” While I commend the entire article to your reading, here is some of the wisdom offered by the author:
- Do not mix your family finances with those of the business.
- Do not muddle along without employment agreements.
- Do not forget to get (and remain) street legal with appropriate licenses and filings.
- Do not fail to have a succession plan.
Remember, large or small, your business is just that – a “business.”
If you treat the company accounts like your personal checkbook, hire and fire employees on a handshake (if that), ignore “legal formalities” attending the creation and operation of the business and take the “get-around-to-it” approach to the succession of the business, then do not be surprised when the business crashes and burns.
Teaching point: Take time right now to engage competent legal, accounting and financial counsel to help you stay out of trouble … before it is too late.
You can learn more about succession planning in the business succession planning on our website. Be sure to sign up for our free e-newsletter to stay abreast of issues like these that could affect you, your loved ones and your estate planning.
Reference: Inc. (April 9, 2012) “4 Worst Legal Mistakes a Family Business Can Make”