Breaking up a dysfunctional family business

On Behalf of | Jul 12, 2022 | Business Litigation |

Your father started the family business decades ago. He ran it for as long as you can remember, and it was very successful. When he passed away, he left that business to you and your siblings.

At first, you were excited to run the company together. Things went well and you worked hard. But that has all changed over the years. Maybe your siblings don’t really want to be involved, maybe they’ve made mistakes that have harmed the company or maybe they just want to do things a different way than you do.

Whatever the reason, this is not uncommon. It’s been found that a mere 10% of family businesses make it to the third generation. By your generation, the vast majority of them have already failed. It’s just not easy to keep a company like this together. And that may not be your fault in any way, but there are dynamics you have to deal with that are out of your control.

So how do you end the business?

If you and your siblings decide that it is time to move on from the company, then you need to know exactly what steps to take. Some things that you’ll need to consider include the following:

  • What ownership percentage do you all have?
  • Was the business split equally between all of you, or did different siblings get different percentages?
  • Does everyone agree that it’s time to close the business down?
  • Does anyone want to stay and continue running the business?
  • Would it be a good idea to sell the business to a third party and divide the money that you earn?
  • What is going to happen to all of the business’s assets?
  • What will happen to all of the employees?
  • What legal steps do you have to take to officially move on from the company?
  • Do you all have a partnership agreement that lays out what some of these steps may be or gives other guidance for dispute resolution?

Safe to say, this can be a very complicated process. There’s a lot of money on the line and you have to deal with family dynamics along with business questions. Be very sure that you understand all of the legal options you have as you navigate this process.