Can a family-owned business survive a dispute?

| Sep 1, 2020 | Business Disputes |

Going into business with a sibling or taking over a company from a parent can be rewarding. Nevertheless, a solid business plan should be in place from the beginning. While co-owners who are siblings expect to have a high level of trust, there are still times when siblings will fight over the company’s direction. It could signal the end of a partnership under normal circumstances. A long-held family business, or a new one hoping to become one, needs to plan for disagreements, particularly if the company is thriving and much is at stake.

It can seem callous to negotiate a detailed contract with siblings outlining the business’s structure and ownership, but the strength of working with family can also be its biggest weakness.

Why family businesses can struggle

Running any business can be particularly challenging from time to time. Equal partnerships can sometimes lead to internal disputes. No one may want to give up ownership of the company, but it may still be a matter of protecting her or his business interests. Conflicts can come in the form of:

  • Disagreements over current or future leadership
  • Disagreements over job responsibility
  • Disagreements over financial compensation
  • Disagreements over new or risky strategies
  • The credit for major success or blame for major mistakes

Emotion and sentiment cloud the issues

Family members coming to the negotiation table bring a lifetime of shared history with them. It can include petty grievances, unresolved jealousy, or a sense of betrayal that goes deeper than a business partnership. This can destroy that sense of trust that is so important to a family business. It can also impact the reputation of the company among its customers.

Saving the family business

As with any business, there are ways to limit the damage and save the partnership. One initial instinct may be to prevail in the dispute; however, winning the battle can mean losing the war. Preserving the family dynamic is an integral part of the business’s chemistry. Rather than prevailing, it may be a matter of finding a solution in the middle, so each side feels that they were heard.

There may also be specific guidelines for solutions outlined in the initial agreement that the attorney needs to keep in mind. This can be done through negotiation with a neutral family member, mediation or arbitration. If done right, it enables the family business to move forward once again.