Starting a business is challenging especially if you’re on your own. Having a partner can make things easier since you have someone who can take some of the workload from you. But starting a business with your family offers many benefits, including giving your children the experience they need while earning money. There are even tax incentives when the business hires family as employees.
Despite these benefits, you should still consider some things before finalizing your plan of setting up a family business.
Develop a Business Plan
Similar to other business, developing a business plan is the first thing you should do. If you fail to plan, then you’re planning to fail. Consulting accountants and lawyers is essential when developing the business plan. It will also be advisable to consult adult family members since the family will run the business.
The business plan should define the roles of the family members. Each role should fit the family member assigned to it. They should also know the role by heart and what they need to do. Additionally, the role description should also indicate the manager or supervisor who will monitor each person’s performance in the business.
The business plan should also include the compensation given to each role. It may come in the form of a monthly salary, an hourly wage, or a specific percentage of the business’ profits. The important thing is that the compensation is set, and every member of the family knows how to compensate for their work.
Establishing the ownership of the business is also important. The business plan should indicate the stake of each member of the family in the business. It should define if they are simple employees or part owners of the business. The business plan should also determine if the family members will receive a percentage of the profits at the end of each month, quarter, or year. Additionally, it is important to determine the family members’ voting rights in case you’re planning major changes in the business.
A good business plan includes a succession plan. When the founder of the business retires, someone will have to take over the business. To avoid infighting among family members, especially when it comes to the family’s third or fourth generations, a succession plan should already be in place. Changes are possible in the future, but it’s important to have the succession plan before the business starts its operations.
An exit plan is also important for the business plan if a member of the family leaves the business. The business plan should indicate if the family members will receive additional remuneration if they leave the business. Or if they are considered a simple employee of the business who is entitled to the same benefits as a non-family member employee. This allows the business to avoid issues if the family member claims that he’s entitled to compensation after leaving the family business.
Set the Rules for the Corporation
Rules are meant to keep things running smoothly in the family business. Without rules, conflicts may emerge. If these conflicts are not resolved, it might end up with a divorce mediation lawyer getting involved in the issue. To ensure conflicts are avoided, the family business should institute rules that everyone should follow.
One important rule is separating personal life from personal life. This will not be easy at the start, especially if everyone lives under the same roof. But family members should always remember not to talk about the business when they leave the office. In the same way, they should leave their personal lives at home when they start their workday.
The family should also welcome advice from outsiders. Even as the business may want to keep everything within the family, there are instances when advice from an outsider is beneficial. The advice may come from the family lawyer or business consultant. These professionals are experts in their respective fields. So, it’s important to listen to their advice when it comes to their expertise.
Contribute to its Success
A family business will only succeed if everyone performs their respective roles properly. Due to this, every member of the family should work for the success of the business. They should contribute what they can to allow the business to prosper and grow. If the business fails, the whole family will suffer. So, it’s important for every family member to understand the significance of their role in the business and for them to perform it properly.
While the best way to start a business is by working with the family, it’s still important to consider the preceding point to avoid family business issues in the future.
