Sometimes a family business begins with an entrepreneur, an idea and a dream.
Other times, it begins with an inheritance.
A parent, grandparent, uncle or other family member passes away and leaves behind more than an estate. There may be an operating business, real estate, equipment, inventory, investments, collectibles or other assets that suddenly need to be managed.
Almost overnight, family members who never planned to work together can find themselves making important business and financial decisions together.
They may be brothers and sisters, cousins or members of different generations. They may have different careers, financial situations, personalities and ideas about what should happen next.
Yet now they share something significant: ownership.
And that raises an important question:
Just because you've inherited a business together, does that mean you've decided to be business partners?
Those are two very different things.
Before rushing into decisions about titles, responsibilities, compensation or what to sell and what to keep, families should have some important conversations about what they are trying to accomplish together.
Here are five places I would start.
1. What Are We Trying to Accomplish?
It sounds like a simple question, but family members may have very different answers.
One person may see an opportunity to continue and grow the business. Another may want to preserve what the previous generation built. Someone else may want to sell the business and other assets and move on.
None of those answers are necessarily wrong.
The problem occurs when everyone assumes the rest of the family wants the same thing.
Before developing a business plan, start with a family conversation:
What do we want this business and these assets to become?
Are you trying to build a business for the next generation? Generate income? Preserve family assets? Prepare everything for an eventual sale?
A shared inheritance doesn't automatically create a shared vision.
That vision has to be developed.
2. Who Owns What—and Who Decides What?
In a family business, three words can easily become confused:
Ownership. Management. Leadership.
They aren't the same!
Someone can own part of a business without working in it. Someone else may manage the business every day without having the largest ownership interest. Another family member may have expertise that makes them the logical person to lead a particular part of the operation.
Problems often develop when families don't clearly distinguish between these roles.
Questions worth discussing include:
Who owns the business and other assets?
Who is responsible for day-to-day operations?
Which decisions can management make independently?
Which decisions require the owners' approval?
How will major financial decisions be made?
What happens when the owners disagree?
You don't want to be figuring out the answers in the middle of your first major family disagreement!
3. What Role Does Each Family Member Want?
Being an heir doesn't automatically mean someone wants to be an employee.
And being an owner doesn't automatically make someone a manager.
One family member may want to devote considerable time to the business. Another may want to remain an owner but have very little involvement. Someone else may want to sell their interest altogether.
Those expectations need to come out into the open.
Ask each family member:
What role do you want to play?
Then go one step further:
What responsibilities and accountability come with that role?
If someone works in the business, how will they be compensated? How will performance be measured? Who will they report to?
Family relationships shouldn't eliminate normal business accountability.
In fact, when you're working with people you love, clarity becomes even more important.
4. How Will We Handle Disagreement?
Every business has disagreements.
Add family relationships, inheritance, money and decades of family history, and those disagreements can become much more complicated.
That's why families should discuss how they will handle differences before a major conflict occurs.
Will decisions be made by consensus? Majority vote? Based on ownership percentage? Will certain decisions require unanimous agreement?
And what happens when you simply can't agree?
You may also need a process for bringing in outside advisors when the family reaches an impasse.
One of the biggest mistakes families can make is believing that good family relationships mean they don't need a process for resolving disagreements.
It's often just the opposite.
A good process can help protect those relationships.
5. What Rules Are We Willing to Live By?
As a family begins operating a business together, informal understandings aren't enough.
Eventually, questions arise.
Who can spend company money? How are family members reimbursed? Who has access to financial information? How are family members compensated? Can someone hire another relative? What documentation is required? How often will the family meet to discuss the business?
These may sound like administrative details.
They're not. They are part of creating a system of trust.
Clear policies and expectations don't mean family members don't trust each other. They help prevent misunderstandings that can damage that trust later.
The goal isn't to create unnecessary bureaucracy. Far from it! You want to create enough structure that everyone understands how the family will conduct business together.
You Don't Have to Have All the Answers
Moving from heirs to business partners doesn't happen simply because ownership changed hands.
It requires conversations. Some will be easy. Others may be uncomfortable.
But avoiding those conversations doesn't make the issues disappear. It usually means they'll surface later—often when there's more money, emotion or conflict involved.
If your family has inherited a business or significant business assets, resist the temptation to immediately focus only on what needs to be sold, transferred, managed or operated.
Ask a more fundamental question first:
Do we want to be in business together?
And if the answer is yes, ask another:
What do we need to put in place to work successfully together while protecting our family relationships?
You don't have to solve everything in one meeting. You simply need to begin.
Start the Conversation.
If your family has inherited a business or significant business assets, you may suddenly find yourselves making decisions together that you never expected to make.
What should we keep? What should we sell? Who should be involved in the business? Who makes the decisions? How do we handle disagreements? And perhaps most importantly—do we really want to be in business together?
You don't have to figure it all out by yourselves.
Sometimes the first step is simply getting everyone around the table and starting the conversation.
To learn more, schedule a 30-minute NO COST conversation with one of our family business advisors. Email us at info@tncfb.com.
We look forward to hearing your family's story and helping you move from heirs to business partners with greater clarity, communication and confidence—while protecting the family relationships that matter most.
