ShareThisBy BRUCE FREEMAN
Wednesday, November 15, 2006
Q: 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?
A: Disputes among family members in a family owned business can easily cost thousands or even millions of dollars in legal fees, and result in 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 that they have ways to resolve conflict that do not immediately require a lawyer's involvement.
(Bruce Freeman, owner of a small business and an adjunct business professor at Kean University, is always looking for interesting success stories and lessons learned. Entrepreneurs can e-mail their ideas to bfreeman(at)proline-com.com or visit www.smallbusinessprofessor.net.)
