Legal Tips for Family-Owned Businesses.Family-owned businesses usually face more I issues than other businesses. These come from love and affection AFFECTION, contracts. The making over, pawning, or mortgaging a thing to assure the payment of a sum of money, or the discharge of some other duty or service. Techn. Diet. , family rivalries, succession and tax planning Tax planning Devising strategies throughout the year in order to minimize tax liability, for example, by choosing a tax filing status that is most beneficial to the taxpayer. , an older generation not ready to let go, a younger generation not ready to be responsible, marriages and separations, family conflicts, and illness. Here are tips to help a family-owned business deal with and avoid some legal issues and other problems: * Organize the business as an entity (a corporation, partnership or limited liability company). This makes it easier to structure decision making and easier to plan for transitions, like changes of ownership within the family. * Owners of the business should meet regularly to discuss goals, vision and plans. * The business should develop a succession plan to accommodate these goals. The plan should address ownership and control. Develop the plan with help from a lawyer, accountant A person who has the requisite skill and experience in establishing and maintaining accurate financial records for an individual or a business. The duties of an accountant may include designing and controlling systems of records, auditing books, and preparing financial statements. and insurance agent. All stakeholders Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. should participate in creating the plan and be informed of its contents so surprises may be avoided. * When a family member marries, someone may want the new spouse spouse A legal marriage partner as defined by state law to work in the business, while others may not. To avoid problems, have a written policy on either permitting or restricting re·strict tr.v. re·strict·ed, re·strict·ing, re·stricts To keep or confine within limits. See Synonyms at limit. [Latin restringere, restrict- : re-, involvement of spouses. * Consider how to allocate To reserve a resource such as memory or disk. See memory allocation. ownership among family who work in the business and those related only by marriage. Also consider whether to allow ownership among family members who do not work in the business. * Don't don't 1. Contraction of do not. 2. Nonstandard Contraction of does not. n. A statement of what should not be done: a list of the dos and don'ts. force someone to stay in the business if he or she wants to leave. The interests of that family member can be purchased. * When family members are in control, they can have stability. But this can also blind the owners to contributions of outside advisors. Consult with professionals, including your lawyer and accountant, on how best to operate the business. * Regarding compensation, start with the idea of treating all family members equally. But be flexible because equal treatment may not fit everyone. For example, if one member has a large family while another has a small family, different pay plans may be needed. * Keep written records like in any business, especially of arrangements among the family. This will reduce the risk of changing memories and misunderstandings. Addressing these issues early, before their sensitivity increases, can reduce difficulty and tensions and help a family-owned business prosper. Legal help can be obtained to prepare the succession plan and buy-sell and other agreements necessary to make sure the business runs smoothly for years to come. |
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