Conflict within a small business is stressful and difficult, as it is within a family. These stressors combine when a dispute arises within a family-run business. Add in a divorce and the tension can rise to a fever pitch.
We know that business succession planning is always more complicated when blood and money are on the line. Planning and preparation is the key to getting through the difficult times.
Nothing is more damaging to a family business than a divorce, especially when both partners rely on the operation for financial support. Divorce starts out as a matter of family law, but when a business is a key asset, it quickly becomes a matter of business law. For a family run business, these two have to overlap.
In a happy marriage, no one wants to prepare for a possible split. Family businesses need to have this possibility covered as carefully as possible. Dispute resolution procedures should be included in the partnership agreement of any business, but in a family business it is even more urgent. A process for splitting the assets or potential buyout is essential.
This can also be covered in a prenuptial agreement, or if already married a similar postnuptual agreement. Like the partnership agreement in the business, it protects the most valuable asset of the family–its business–from too much damage should the worst come to pass. The difference is that this is advice for family court, which has its own procedures and laws.
Another key consideration for any family business is how it will be passed on to future generations. Disputes between siblings are common when the owners of a business pass on or plan to retire.
Clear succession plans for the next generation are an important part of both the partnership agreement as well as the estate plans of the owners. These documents need to be as clear as possible to avoid a conflict which can drag out for many years, increasing expenses and damaging the business.
Covering all areas
For a family business, many areas of law come together at once. Developing appropriate plans is a matter of many different areas of law. A law firm experienced in business, family, and estate planning can help a family business put together the framework covering all potential circumstances to get the family and business through the toughest times.
Planning is always the key for a family business when disputes arise. It can save a tremendous amount of heartache and money when things go wrong.