Managing Disputes in a Family Business

Stressed business colleagues having a meeting in an office and solving problems, family business disputes

Imagine what would happen if someone in a family bakery, for example, decided to stop using a recipe handed down for generations. It may not sound like it could cause strife, but the truth is even simple disagreements can cause huge business upheaval. Would you know how to handle such a business dispute before it leads to litigation? This article will delve into the reasons such issues can lead to disaster, as well as help you understand how to prevent them. By the end, you should also know what to do if the family business already has such a problem, as well as who you can call to help.

Why Family Disputes Create Business Problems

It is very important to know the reasons why family businesses can have unique disputes. A business partner family comes with different types of relationships, and these can have an impact on the dynamic of a company. Knowing exactly how this is different from a normal organization can help you resolve issues before they escalate too far.

Emotion and Connection

In many businesses, one can avoid personal closeness with their colleagues. While some people connect with others in an office, it is never the same as in a family company who have had several years to bond.

Generational Differences in Company Vision

Many family businesses cross generational lines, with parents and their children working together. As people grow, though, they often take on very different world viewpoints, although this is not universally true. Regardless, at present, this can affect how different groups make business and ethical decisions.

A Legacy of Baggage

Joining a family business comes with many years of knowledge of the other person. This may include previously-held relationship problems, trauma, or simple disagreements. It can also bring with it a feeling of control from a parent to someone they still mentally perceive as “their child”.

All these things can escalate issues that may otherwise be handled through simple formal discussion.

The Possibility of Partner Breakup

A family relationship and a business relationship are separate legal bonds, even when they occur at the same time. If a family breaks up, such as during a divorce, this can lead to issues with how one handles the business.

Depending on the nature of the breakup, it may even demand the use of lawyers to communicate between business partners.

Preventing Family-Owned Business Disputes

There are a few steps people can take to prevent things from escalating in the first place. If you are in a situation where you are considering joining a family business or recently have, think about putting some of these in place.

Creating Clear Structure and Boundaries

Ensure people understand their role in the business and prevent them from stepping on one another’s toes. If necessary, assert professional and personal boundaries. For example, define how to handle if people are subordinate to siblings.

Keeping Agreements Formal

One of the best ways to ensure everyone has a firm understanding of their role is to make sure its details are in a contract. Not only can this offer someone a good understanding of what they need to do, but it can help if a situation escalates.

If a change in someone’s role needs to occur, it allows someone to negotiate or even refuse the role, along with providing a clear reason why. Said contract can even include the steps the family needs to take to resolve conflict before litigation occurs.

Using Independent Advisors

Using a third party can often help a family business avoid emotions and personal opinions when making hard decisions. They can do things like provide audits, offer professional advice, or even discuss issues that may be hard for the family to hear. For example, whether it would be best for the business to let a family member go who no longer contributes what they should.

Resolving Business Family Disputes

When problems do not go away, they can start to impact not only the business but the family itself. As the issue escalates, you will want to know what steps you should take to prevent things from going too far.

Open and Honest Discussion

Ensuring everyone is communicating well with one another can be the most powerful way to de-escalate a situation. Make sure people not only speak the truth but also that they listen and understand. Try not to hide anything and book meetings to discuss problems, but also be tactful or diplomatic with difficult topics.

Bring In a Mediator

Using a neutral third party can help to facilitate discussion between family members. They will not have an investment in the family and can talk about the business as though it were any other. They can also set clear goals for mediation, which everyone can agree to before they start.

The goal of a mediator is to ensure everyone feels heard and tries to guide the family members towards a voluntary resolution.

Use Professional Counseling

Using a family therapist can help the members start to work out their familial differences and any legacy of problems they have. It can also give people the tools they need to discuss their needs and problems that impact the business.

Seek Legal Recourse

While this is a last resort, it can be the most serious step. By consulting with attorneys, the family can seek out a binding decision that ensures everyone gets the outcome closest to what they want. If this does not work, it may need to go to a judge, but this can be costly and time-consuming.

Seek Legal Advice from our Knoweldgable Business Law Attorneys

If you have found yourself in such a difficult situation, you will want to tread carefully. Family business litigations are sensitive, and you need to know you are working with an attorney with the tact such a situation demands.

Boyer Law Firm has a history of working with families to help resolve business conflicts. We can talk to you about our process and how we can assist with every step from early discussions to litigation. So, get in contact and learn more about what we offer today.