Family Business

Coping with the In-Law Challenge

You may have started your family business as a small venture and didn’t give much thought to nepotism. Then, you brought the kids on board and your brothers and sisters signed on. Perhaps the business continued to flourish with little conflict. A Dozen Questions to Ask When considering whether to bring an in-law into the business, ask the following 12 questions to help get an honest appraisal of the situation: 1. How well does the individual get along with members of the family? 2. Would the in-law have a similar job and salary if he or she weren’t married to…

Taking Advantage of Family Funds

Remember when you were a kid and your parents paid all the bills and told you what to do? Well, if the family business runs into a cash crunch and you need to borrow money, think carefully before borrowing from parents and other relatives — or you could find you stepped into a time warp. Weighing Equity Against a Loan Among family members, loans tend to be more popular than equity investments because they are cheaper, limit the lender from trying to get involved in the business and carry a lower risk of losing the entire investment. For example, let’s…

Put Social Networking Sites to Work for Your Family Business

If you think that social media is just for teenagers, think again. More than half of those logging on to social media sites are in their mid-thirties or older.     The Benefits of Using Social Media Are Many If branding, communication and targeted marketing efforts are not compelling enough, consider the following social networking success story. One Texas business decided to tie its social networking to a fundraiser for Haiti relief. For every fan added during a specified time frame the company donated a dollar to the Haiti relief effort. Employees spread the word about the fundraiser through posts…

From Counting Transactions to Cultivating Relationships

With technology at the forefront of modern communication, more and more people are turning to the Internet to stay abreast of the latest news and information. Likewise, many of today’s consumers use the Internet to find the best prices and to conduct research when they’re planning their next purchase. What does this trend mean for your company? The right technology can transition any business from the outmoded idea of counting transactions to the modern strategy of cultivating relationships. If you haven’t yet embraced modern communication as a significant part of your company’s overall marketing strategy, it may be time to…

Value Your Business Internally and Externally

While preparing your succession or estate plan, it can be helpful to value your family business both internally and externally. You might wonder what that means — because you think your company has just one value. In fact, it can have multiple values depending on the valuation standard used. The different results can help you determine whether to keep the family business, pass it on to the next generation or sell it to an outsider. Two common standards used in valuing a family business are: 1. Investment value. This gauges internal value, which represents the value to a particular investor based on…

Remember Business Basics When Paying Relatives

Paying family members wages, salaries and bonuses and dividing profits among them can be tricky.   Fringe benefits, including deferred profit-sharing plans, pension plans, insurance programs and stock purchase plans offer an excellent means to compensate family members and, at the same time, help them build personal assets. Keep in mind that certain fringe benefits are taxable and some perks cannot be provided on a discriminatory basis — just to shareholder-employees of the business — without providing them to all employees. Consult with your tax advisor for more information.     It’s not uncommon for some employees to feel they’re…

Why You Need a Buy-Sell Agreement

If you co-own a business with other family members, it’s generally a good idea to have a well-drafted buy-sell agreement to protect everyone’s interests. Here are some basics about this important document, including the valuation methods used. A Buy-Sell Agreement Can: Transform your closely held business ownership interest into a liquid asset. Save taxes. Prevent unwanted changes in ownership. Warning: Ensure that provisions of your buy-sell agreement don’t conflict with existing provisions of a company’s organizational documents — its articles, bylaws, partnership agreement or Limited Liability Company operating agreement. There are two basic varieties of buy-sell agreements. The first type…

Consider Hosting a Family Meeting about Your Estate Plan

If you’re a business owner and a high-net-worth individual, you may want to gather your family members together to discuss the details of your estate plan. This can be especially important if you own a business that employs family members. These meetings are a little like the Scottish clan gatherings held hundreds of years ago by clan chiefs to discuss their succession and inheritance plans. The Purpose of Gatherings For centuries, some Scottish clans had a tradition of getting together periodically. When communication and travel were difficult, these gatherings provided a way to prepare for the future. Estate planning was…

Define a Chain of Command

Part of the responsibility of a good manager is to smooth over conflicts among employees — yet that task can be complicated when running a family-owned business. The U.S. Small Business Administration studied family-owned companies and found they must deal with the dichotomy of workplace and personal relationships. At home, family roles — husband/wife, parent/child and in-laws — may be traditionally defined. Language is personal and attitudes may be more subjective. Here are three basic tips that can help keep those relationships from interfering with work: 1. Leave it home. Determine that family matters will stay where they belong —…

Keep Family Employees in Line

Running a successful family business can often be more difficult than running a non-family business because the dynamics of management are blurred. A Family or a Business? Family-run companies can slide into trouble when owners don’t differentiate between what’s acceptable in the family and what’s acceptable for the business. A common question that needs to be answered: Do you have a family-first business or a business-first family? A paternalistic culture can lead to management that is based more on consensus than on performance and action. To ensure that your family-run business operates efficiently, set up performance standards that every working…