Ask
The Small Business Professor?
Dear Professor Bruce:
I dislike lawyers. What can
I do in my business to make sure members of my family will
not get into arguments that cause my business to have to pay
a lot of legal fees?
Answer:
Disputes among family
members in a family owned business can easily cost thousands
or even millions of dollars in legal fees, and result
incalculable damage to family relationships. Often, separate
lawyers may be necessary for the directors, as well as for
the business itself.
The need for lawyers is a fact of business life. But a good
lawyer to a family business will work with you to suggest
ways to anticipate and eliminate problems before they
escalate and result in expense and bruised feelings.
Matt Hafter, a principal of
Grippo & Elden LLC (a Chicago law firm that represents
family businesses in corporate and litigation matters),
recommends several tools to head off disputes. These include
training family members in communication techniques so
disagreements can be aired and resolved. Regular family
meetings or reports can help keep family members informed
and provide a forum for discussion. Or, the family business
can implement agreements requiring the disputes be submitted
to non-binding mediation where a neutral professional works
with the family to resolve the dispute, and arbitration is
an option as well. If a disgruntled family member is also a
shareholder, a business may consider buying out the
shareholder at a purchase price based on a pre-determined
formula. Each family
has different communication styles, but you should consider
all of these methods so family members feel they have ways
to resolve conflict that do not immediately require a
lawyer’s involvement.
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