Problems with Family Run Businesses

A family business is not ordinary with other kinds of businesses; problems and certain issues may occur at no time and handling the situation is truly a big challenge to overcome.

There are several problems with Family Run businesses that you should know about and this will help you to think of a better solution in order to save the business.

Common Issues with Family Run Businesses to Think About

A family run business normally faces common issues that are also encountered by other businesses. These issues are vital in the growth of the business as every member is learning through the experiences and they are united to think of the possible solutions for the early resolution of the problems. Some issues may involve in planning and for what particular polices are must be implemented for the benefit of all, but since each member has their own interest sometimes this result to conflicts and misunderstanding among the members of the family.

Another issue which is common to argue by the family members is in the area of decision-making process, of who is more authorized to make the final decision, not considering the legal structure of the business (such as partnership, corporation, or LLC). But these are just the few issues that a family run business usually tackles and we will discuss more of the problems plus the corresponding solutions for every situation.

How to Handle Problems with Family Run Businesses?

There is no business that encounters no problems and there are no problems without a possible solution. Therefore if your family run business faces an issue that involves all the family members, don’t ever think that it can’t be resolved in a proper way or proper forum. The following are common problems with a family run business and the applicable solution on each situation:

  • Lack of formal business entity– One of the most common causes of conflicts in a family run business is the failure to choose a formal business structure that will define the rights, responsibilities, and other duties of each member. This informality in a family run business will result to lack of clear policies that will distribute equally the privileges of each member and the sharing of duties for the management of business. To resolve this, the family members should choose the structure where the business will benefit most legally like LLC, corporation, or partnership.
  • Lack of proper documentation or written agreements– This is the normal pitfall of a family run business that often leads to confrontations, as in most cases when agreements were done they fail to support it in writings. Therefore, it is appropriate to put in writings every agreements and this should be signed by members as a sign of their approval.
  • Miscommunication– If there is confusion regarding the roles, or there is rivalry among the family members, this will create disputes that will affect in the growth of the business. This can be avoided by not letting misunderstandings to happen and there should be a strong family constitution that will unite all the members as one.


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