There is no doubt about it – family businesses still remain the backbone of the U.S. economy. With a contribution of more than 60 percent of the country’s GDP and almost eighty percent for the creation of new jobs, these family businesses play a crucial role in making the country economically stable. However, these family businesses are never without conflicts. In fact, some of them also suffer from legal matters that seem too complicated to handle all by themselves. Thus, the need for lawyers to intervene and rescue the company from capsizing. What are these legal matters common to family businesses? Read further to find out how you can possibly address them

Succession

Determining who will succeed soon after a family member has died or retired is a legal issue that some family companies face. Elderly family members who have been part of the company may resist change and would want to maintain the status quo and so they insist on appointing someone they prefer to succeed in the position. 

 

This issue may prove to cause a huge conflict that lawyers from a reputable firm have to be hired to ensure that the succession and turnover will be done according to what is deemed legal by law. A website for lawyers and attorneys highly recommends that in order to avoid this issue from ruining family relationships and the reputation of the company, a well-defined set of rules and plans must be placed right at the onset of founding the company. However, if the company exists for quite some time and needs to have someone to replace the retired or deceased member, hiring a lawyer will prove to be helpful. This ensures that matters will be looked into with much objectivity and impartiality. 

 

Hiring Family and Non-Family Employees

 

Taking in non-family members as part of the workforce may pose problems because they may not feel comfortable working when news about family members having conflicts about the company. These non-family members may not be happy knowing that they have limited opportunities for advancement compared to family members. Things can even be worse for on -family members if family members resent their existence within the company. 

 

To address this issue, non-family members should offer a fair and unbiased perspective with regard to some business issues that may arise. Family members must conduct exit interviews so that they will become aware of the real reason why non-family members decide to be out of the company. This way, family members will also be able to come up with an action plan to ensure that anything unpleasant for non-family members would be properly addressed as soon as possible. 

 

Compensation and Benefits

Giving fair salaries and compensation to family members is also another common legal issue that family businesses may face. Moreover, dividing the profits among family members who have significant participation in the company can also be a source of legal conflict among families. 

 

Make sure that compensation and profit-sharing policies must be based on what the industry guidelines deemed legal and just. Things like fringe benefits and equity distributions must also be determined and written as part of the company's policy for additional compensation. 

Employment Qualifications

Some family businesses have issues with the specific qualifications and guidelines when it comes to hiring family members. Some family-owned companies prohibit hiring in-laws with the aim of preventing potential conflicts. However, there are also companies that are forced to hire family members even when they are aware that these people do not have the required set of skills and experience. In turn, they cost the company some amount of money due to not being able to achieve the desired performance or productivity level. Other family members also cost the company some money due to their poor attitude towards non-family members who are part of their team, they might lose the motivation to work. 

 

This can be addressed by developing a strict policy of hiring only those who have certain skills and qualifications. This would mean a family member can only be allowed to work in the company if he or she possesses these requirements. Policies regarding employee relationships and work attitude must also be in place.

 

A 2012 study conducted by Harvard School showed that 70 percent of family businesses would either fail or be sold to others even before the second generation gets the chance to try their hands on it. Do not let your family business fail, always enlist the help of an expert when legal matters start to threaten its existence.

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