I spent the Thanksgiving weekend with some great people (my son's future in-laws). We talked about tax and legal issues in their two family/friend businesses. This subject ties in well with a recent discussion I had with attorney Susan Dawson. I asked Susan about how to prevent problems in these family business situations. She came up with two agreements or contracts to use to make things clear between 
family members and friends. Here are her suggestions:
Whether the agreement is a partnership agreement for a partnership, an, operating agreement for an LLC, or a shareholder agreements for a corporation, it needs to be put in place at the beginning of the company's existence.
The agreement should discuss things like:
- When can one or more family members fire another family member? How can someone be bought out or removed from management? Notice the question is not can these things happen, but under what circumstances - e.g. negligent work performance or abuse of power, criminal activity, abuse of alcohol or illegal substances.
- Can someone quit? If so, what happens to their ownership interest?
- What happens in the event of a divorce? Not just when the business partners are married, but what if you go into business with your brother's wife and she begins divorce proceedings against your brother. Do you still have to be partners with her?
Susan says: Having a level headed plan in place will not stop the emotion, but it will prevent the emotion from getting in the way and potentially destroying the business in the process.
Tomorrow, Susan discusses what to do about the family member who is not pulling his weight in your family business.
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Susan Dawson has devoted her career to representing businesses, business owners, and entrepreneurs. She prides herself in providing unparalleled service to her clients, quickly responding to and addressing their needs while using her extensive experience to advise clients on the best course of action for their businesses. She concentrates her practice in the areas of Business/Corporate Law, Employment Law and Commercial Real Estate/Leasing.
Waltz, Palmer & Dawson LLC (www.wpdlegal.com) was founded in 2008, creating one of the only entirely women owned law firms in the Chicagoland area. The firm uses its unique perspective to provide unparalleled legal services to its clients.
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