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Key Considerations of Running a Family Business

Key Considerations of Running a Family Business

Separate from the fact that Samsung, Dyson and Specsavers are all large and very successful corporations, what is possibly not as well-known is the fact that these corporations are all family-owned businesses.

It is accepted that managing a family business can be complicated, particularly because mixing personal and work life does have the potential to either create a successful family dynasty or a family feud. Some of the advantages that come with running a family owned business include stability, commitment to the business, and longevity, however, some of the disadvantages include a lack of family interest in the business, conflicts between family members, and that there can be a lack of structure.

Whilst there are many strengths to having a business run by family, the weaknesses highlighted above can make the running of the family business a constant and long term struggle. Therefore, if a business can determine what the advantages and disadvantages are in running a family business it can ease any long term challenges and help the business to prosper. 

Below we outline some of the key considerations that family run businesses should look at in order to maximise the chances of their success in the future. 

Having a suitable business structure in place

Within family businesses there can be different relationships between certain family members that have the potential to cause tension. Personal histories between family members can come into play providing more opportunities for arguments to arise. Moreover, it can become common practice for family businesses to rely on mutual trust to make decisions and can mean that there is less of a business structure in place. Therefore, from the outset it can be beneficial for a business to have structure and corporate governance in place in order to ensure that family members abide by both internal rules and external corporate law.

The type of businesses structures that businesses can choose to operate on include sole proprietorship, partnership, and as a company. Each structure comes with their own sets of rights and regulations affecting both the individual, family, and business in different ways. It’s important to take professional legal advice on what is the correct structure for your business.

Having a family employment policy

Having a family policy in place within a family business can be beneficial, not only for the family members involved within the business but also for non-family members in order to promote equality and to mitigate any narrative of nepotism from the business. A family business can iron out who within the family are contributing on an informal basis and who is working within the family business full time as either an owner or an employee. Furthermore, a family employment policy can help structure the business, for example, ensuring that family members report to non-family members, where possible.

It is important to note that Employment Contracts should also be used for both non-family employees and family employees, and it is required by law that these are in place. In particular, for family employees they can regulate the relationship between your family business and the family members to ensure there is alignment on matters such as hours of work, holiday entitlement, and salary.

Succession planning

Many family business owners fail to create succession plans, particularly in circumstances where the current family member in charge refuses to give up the reins. When a business transitions from one generation to another it can be difficult time for family businesses particularly if the new generation want to introduce new rules and policies to the business or if the business is to be passed on to a non-family member. The succession planning process should involve a phased procedure in order to ensure that each stakeholder’s interest is taken into account. A phased approach will also promote professionalism within the business and ensure that the business’ chosen candidate is perceived as legitimate when they secure the role.


As noted above, when working with family it can sometimes be the case that unwritten practices are followed and many decisions are made on mutual and family trust. This can consequently lead documentation going unrecorded which can become a potential pitfall if disagreements between colleagues start to arise. Therefore, it is important that a record is kept of all necessary documentation such as business transactions, corporation/legal documents and written agreements with external clients and between family members within the business.

If your organisation needs assistance with reviewing or drafting policies and procedures of your business or assisting you with any other employment matters within your business, call our experienced employment team now on 0141 221 1919.

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