Two hands to the plough make a bigger harvest. But how will the harvest be divided? That’s the big question when going into a business partnership with people.
If you can’t trust family, who can you trust, right? Right! So, it makes sense to go into business with family. And if it all works out, everyone is happy. But business is business. Family businesses are faced with the same concerns as other businesses. While co-owners of businesses are working together for the common interest of the business, each co-owner has personal interests that must be protected. Doing business with family can be a huge roller-coaster because there is more than a business at stake. Family relationships have been destroyed because of business.
The Hinduja Brothers have been described as a close-knit family, running a multinational conglomerate with various business interests including oil and gas, manufacturing, tech, healthcare, and energy. They are worth an estimated $13 billion according to Forbes. The family has been in business for close to 100 years, but now there is trouble in the house that Parmanand Deepchand Hinduja (the father and founder of the Hinduja business empire) built.
Today, the Hinduja Brothers are in court. In dispute is one of the many assets of the Group now being claimed by one of the brothers. This goes against a reported agreement between the brothers which stated that the assets of one belonged to all, and a mutual agreement that each brother would appoint the others as executors to his will. Considering how long the brothers have been in business, they have done relatively well in sticking with that principle. But it seems that principle may not last through the next generation.
Business co-ownership can be very rewarding, but it comes with its own challenges. These challenges can be further complicated when the emotional considerations of the family are in play. I have done business with family in the past so I have first-hand experience with this. Would I do it again? I don’t think so. What I know for sure is that if I were to do business with family again, I would do it very differently.
My advice to anyone wanting to do business with family is to think long and hard about it and prepare for what could possibly turn out to be a nightmare.
Here are some things to keep in mind when entering into a business partnership with a family member.
Formalize the business
Business with family should be formalized in the same way business with non-family members are formalized. If it is a partnership, the terms of the partnership should be explicit and documented. Negotiate a buy-out agreement as you would with any other business partner. Establish guidelines for succession. Basically, any legal considerations as to the form and formation of a business should be in play when setting up a family business. It’s better to go through the pain of the formalities in the beginning than have resentment and bitterness down the line.
Delineate roles
Who is going to do what in the business? Who has what expertise and who is in charge of what? How will decisions be made? Delineating roles makes it easier to know who to hold accountable for tasks and ensures that people are not getting in the way of each other.
Separate business and family interests
While it is tempting to blur the lines between business and family, there should be clear boundaries agreed upon by participating family members. Each family member should have their own independent team of advisers who can dispassionately assess their position in the family business, and advise them accordingly. The legal and financial advisors for the business should not be the same for the individual family members.
Respect the needs of each family member
As the family grows, individual family members will have their own needs, which may be at odds with the collective family interests. The needs of each family member should be respected. In the same vein, family members should not take advantage of others in the business.
Keep business and family separate
As much as possible, keep business and family affairs separate. Business decisions should be made using business considerations. Leave business in the office and reserve family time for family.
