Family Fun: Four Things to Consider Before Starting a Family Business

As a family-owned business and having several clients that are family-owned businesses, we understand the benefits and appeal of going into business with your family.  And while it is fun to work with the dog at the office and nice to know that I don’t have to fear retaliation for taking a “mental health” day, working with family can be challenging.  As such, here are four things we highly suggest that you consider and/or discuss before diving in to the “family fun.”

  1. Job functions.

In any business model you want to ensure that job functions and roles and responsibilities are clearly defined.  Who is going to be the company’s president?  Treasurer?  Who is actually running the operations?  Who will be managing who?  Will there be non-relative employees?  What does that employment hierarchy look like?

It is also important to “honestly” and objectively evaluate each person’s strengths and weaknesses, as you would do with any employee outside of the “family” context.  It is critical that this be done on a periodic basis, as the roles and responsibilities may need to change over time.  The key is to treat this like any other business; all parties must understand at the outset that things will likely change over time as they do in any business that matures.

Of course, these questions are important to answer when working with strangers, but especially in a family dynamic, it is easy to take a “loosey goosey” approach to the corporate management.  Not only does this lead to potential operational problems, as things can slip through the cracks, but it can be a perfect recipe for disagreements and resentment among relatives.

As such, while it may seem fun to work with your parents (I can attest that it has its perks), you want to take the time to establish the professional roles and stick to them.  People will constantly hear me say this, but my secret to a successful family business is boundaries.  You need to be able to shift between your “relative” hat and your “business partner” hat. Setting these roles early on will alleviate confusion and conflict.

  1. Finances.

Naturally, in almost all business ventures a major goal is to make a profit.  When starting a business with your family, though, it can be awkward to talk about the finances.

Who is funding the business?  Will one family member be more of the “passive investor” while the other puts in the “sweat equity?”  How are paychecks going to issued?  How much is everyone making?

Like the job functions, clearly setting these boundaries early on will alleviate potential conflict in the future.

  1. Communication and conflict management.

When you make the decision to go into business with someone, you are making a commitment.  Owning and operating a business is challenging and there will be stressful moments.  As such, you want to make sure you are picking a business partner, regardless of whether they are a relative or not, that communicates effectively and manages conflicts in a way that is compatible with yourself.

Our family knows exactly which buttons to press to set us off.  As such, it is even more important to consider your relatives’ strengths and weaknesses and take the time to reflect on how they react to stress when making the decision to start a business.  Does your relative ask for help when they need it?  Are they an avoider, meaning they pretend an issue doesn’t exist in order to avoid any conflict?  Do they get scatter-brained when stressed, making it difficult to complete their tasks?

Forming a business when everything is going well is fun – you want to think about your relatives at their “worst,” and then decide if a business is a good idea.

  1. Exit strategy.

You always hope that the business works out for the best, but on a practical level there is always a chance that it won’t.  Whether there be a conflict that makes continuing operations impracticable, or one of the owners is simply ready to move on, you want to make sure you have a plan for the “end game.”

We always recommend that if there are multiple owners in a business, that from the beginning there is an agreement that clearly sets forth how the ownership interests will be dealt with in the event that the owners want to go in different directions, i.e., someone wants to leave, someone wants to sell their interest, or the parties just cannot get along effectively.  You want to have these discussions when everyone is still happy, rather than trying to reach a solution when tensions are high.

No one wants to plan for a “worst case scenario,” but it always pays off to have the tough conversations on the frontend.


Working with family can be tremendously rewarding and fun.  However, just because you are related does not mean you’ll make great business partners.  As such, it is important to really think the decision through before you commit to creating a business with your family.