To Preserve the Family Legacy, Keep Business and Family Separate
For centuries, family-run businesses have been central to our country’s wealth creation. We all know about the incredible amount of risk and work involved in launching a new venture; however, few people, including the owners of family businesses, understand the complexity of managing family dynamics within a business. In the best cases, family members provide a foundation of trust and loyalty to the business; however, in the worst situations, the toxicity of intra-family squabbles can detrimentally overpower the business, and often times, destroy the family’s vision of an intergenerational legacy.
The challenge for family business owners is keeping family boundaries and business boundaries from becoming entangled, especially where family roles and business roles might overlap. For instance, the parent – child relationship can overlap with the boss – employee relationship when a parent is also the employer of an offspring. The more family members involved in the business, the more convoluted the dynamics, especially when the goals of the business are diametrically opposed to the goals or needs of the family.
The problems are further exacerbated when the animosities of excluded family members encroach on the family dynamics, especially when the family business dominates dinner table discussions or when family roles are more defined by family members’ relationships to the business. Eventually, divisions will occur that can preclude opportunities for developing family unity.
Successful families take the additional, critical step of developing separate plans for their business and their family enterprise with distinct mission statements, goals, roles and expectations to guide family members inside and outside of the business. The key is to establish a collaborative approach to developing each and involving excluded family members in the advisory process. The plans must be managed and monitored separately by the governing bodies established within the business and the family. Where conflicts arise, they can be assigned to the appropriate jurisdiction and/or resolved through a resolution process shared by the two.
Generally, the more transparency and communication between the family business and the family enterprise, the more everyone feels an association with both. Instead of provoking competing interests, the family business, as a part of the family enterprise, can become a shared cause in pursuit of the family’s purpose.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2022 Advisor Websites.