A business you create with or for your family can be a legacy for generations to follow. But preserving this legacy in light of an expanding family and the addition of new generations takes planning and sometimes difficult decisions to avoid its breakup and family strife.

Some of the steps you can take to avoid or reduce the impact of family growth and strife on the family business include:

  • Corporate Governance.  Maintain the multi-tier structure of Owner – Director- Officer- Employee or Member- Manager- Employee in the business documents so each family member involved in the business knows their rights, duties, and obligations.
  • Outsiders.  A non-family, independent board member or employee without family ties but with specific talents in a key position can be valuable, but avoid in-laws as divorces can be problematic.
  • Play to Strengths.  Value and reward each family member’s strengths and talents they bring to the business when appointing or employing them, but you are not obligated to treat them equally.
  • Exit Strategy.  Each family member should sign a “business pre-nuptial agreement” that establishes the costs and benefits to departing owners and employees, and provides exit strategies that each family member can exercise without the loss of the business.
  • Know Your Role.  Each family member in the business should know their roles in the business and what is expected.
  • Control Ownership.  Know who can buy, inherit, or make a claim to ownership of the business and control it, including when confronting divorces and deaths.
  • Avoid Self Destruction.  In the event that business and family harmony cannot be achieved, have a business sale strategy to invoke before the family strife destroys the family business.

The attorneys at Brooks, Tarulis & Tibble, LLC have experience in working with family businesses and consulting owners, both to avoid disputes and to address them when they arise. Please contact us if you have any questions or we can assist you in this regard.

This Brief is designed to provide our friends and clients with information regarding the various subject matters covered, it is not designed to take place of legal, accounting, or other professional advice.  If expert assistance is required, the services of a competent professional should be sought. This memorandum may constitute advertising under the rules regulating Illinois attorneys.