How are Family-Owned Businesses Different Than Other Businesses?

Three generational family owned small business in article for LOVE LAW FIRM

Ever get in an argument with your sibling or your parent?

Now think about the potential for butting heads on a daily basis when you work together. The chances are good this can happen if you work in a family-owned business.

The U.S. Bureau of the Census found that roughly 90% of American businesses are family-owned or controlled. These businesses account for half of the nation's employment and half of the U.S. Gross National Product.

A family business is a company in which the owners of the business are related to one another by blood or marriage. A family business can take any form, such as a corporation, partnership, or LLC (limited liability company). A family-owned business can be a “Mom & Pop” convenience store down the street. Or it might be a national chain, like Sam Walton’s department store in Bentonville, Arkansas. That’s what started Walmart in 1962. But certainly, the road wasn’t always smooth for Sam and his family in creation the ubiquitous retail giant.

How are Family-Owned Business Different than any other Businesses?

Family-owned businesses frequently enjoy some advantages over other businesses. When it’s just the family, there can be a concentration on the long term, a greater commitment to quality (which is often linked to the family name and reputation), and better treatment of employees. 

However, family-run businesses also have face a number of management challenges that are created from the blending of family and business issues. For instance, Mom can be “Mom” at home, but she’s the head of operations at the office. And your kid sister is in charge of your paycheck and benefits in the company as head of HR. You can’t complain to your dad about your lazy brother at work because he’s trying to get a shipment out the door. Conflicts often happen because of the overlap of these roles.

There are a lot of family-owned restaurants and farms, and with them come a number of issues that make some tempers flare. Like disagreements over menus, whether to invest in a new combine, and how much the kids should get paid. All of these types of issues put unique stresses on family-owned businesses.

Of course, that family connection makes it tough—if not impossible to fire a co-worker or co-owner. Disputes at work can follow family members from the home into the business and vice versa. It’s a tangled web to weave.

These slights and disagreements can fester until they start impacting the business. Emotions will undoubtedly run high. That’s when mediation is a good idea. 

What is Mediation?

Mediation is a way to settle a dispute without the time and expense of going to court. The two sides with a dispute meet with a neutral third-party who facilitates the reaching of a voluntary agreement. 

A mediator can help the two sides restate and clarify issues, look at all of the options, and come to a workable solution. Mediation is a compromise, but it can be a much more successful outcome than spending years in discovery and court… only to be defeated and lose everything.

Mediation is a viable option for a number of different kinds of disputes, including disputes in family-owned businesses. A mediator can help your lazy brother realize that he needs to pick up the pace or that the family should consider a new more efficient, combine. A mediator doesn’t have to try to preserve the relationships, but instead can offer unbiased advice and counsel.

What Are the Advantages of the Mediation Process?

Mediation offer a number of advantages over litigation or blowing a gasket one day when your brother says or does the wrong thing.

First, the parties have a great deal of control, and the responsibility and authority for reaching an agreement is vested with the parties, not in a judge or jury. Mediation is solution-driven, and the conflict is viewed as a group problem to be solved not an adversarial event. In addition, mediation acknowledges the parties’ feelings, and it’s more personal. That can be key in a dispute with a family-owned business.

Finally, mediation is much less intimidating than the litigation process and it provides for a much faster outcome. Plus, mediation is less expensive, and it’s private.

Why Would You Need a Business Attorney and Mediator?

A business attorney and mediator will understand both the dynamics of the family and New York business laws to come up with solutions. For example, family-run businesses can experience conflict when trying to set guidelines and qualifications for family members who want to participate in the business. This may include some simple bylaws and an operating agreement so that there are clear roles, policies, and revenue-sharing. 

It may also require a clear statement of goals, a business plan to achieve those goals, a set hierarchy for decision-making, and strong lines of communication. A business attorney and mediator can also help create a business succession plan to map out what will happen when Mom and Dad want to stop working.

Contact the Mediation Team at LOVE LAW FIRM

Experienced New York business attorney Francine E. Love, Founder and Managing Attorney at LOVE LAW FIRM, PLLC, has a seasoned mediator on her team. LOVE LAW FIRM can assist parties with mediation and resolving issues in a fast and less expensive manner than a lawsuit.

Contact Francine at [email protected] or (516) 697-4828 in Uniondale, NY to learn more about the mediation process and how LOVE LAW FIRM may be able to help you resolve your problem.

 

Francine E. Love is the Founder & Managing Attorney at LOVE LAW FIRM, PLLC which dedicates its practice to serving entrepreneurs, start-ups and small businesses. The opinions expressed are those of the author. This article is for general information purposes and is not intended to be and should not be taken as legal advice. To learn more about LOVE LAW FIRM please see our website, www.lovelawfirmpllc.com.

Francine E. Love
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Founder and Managing Attorney at Love Law Firm, PLLC which dedicates its practice to New York business law