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Top 5 Legal Tips for Managing Family Members in Your Small Business

By Christopher Coble, Esq. | Last updated on

Maybe you started a family business because you want to love who you work with, to keep the profits in the family, or to establish a brand that will last generations. Or maybe you were just born into it. Either way, managing family members in the workplace may be very different than maintaining those relationships at home. Especially when financial, corporate, and employment laws are involved.

Here are five tips for managing relatives in a family-run small business, from our archives:

Good management always comes from a solid corporate strategy. Ensuring that you have the right incorporation structure for your family business, that you have a plan in place should anything go wrong, and that everyone is on the same page is the first step to ensuring family happiness in the workplace.

2. How to Hire Family Members: Top 3 Tips

If your small biz didn't start out as a family affair, bringing relatives into the corporate fold can be tricky. And that can be true even if your business has always been kept in the family. In many ways, a family member should be treated just like any other employee -- under a clear and concise employment policy, without favoritism, and with the focus on the business as a whole.

3. Can Your Business Get Sued for Nepotism?

Yes. While nepotism (at least the kind that might be practiced by a small family business) may not be illegal per se, showing favoritism to family members in hiring and employment decisions can open up your small biz to discrimination or wrongful termination claims.

4. How to Fire Family Members (Legally)

Hiring a family member doesn't always work out. And firing one can get more than a little complicated, both emotionally and legally. Take care of the legal side of things by making sure your reason for firing the relative isn't illegal and that there is a divestment plan in place. A family business post-nup can help.

5. Do You Have a Family Business Succession Plan?

One of the biggest sources of conflict in family-run businesses is who'll get to run it next. Children and parents, siblings, cousins, and maybe even aunts or uncles may all be battling over the control, so having a plan in place is essential to keeping the family business running smoothly in succession.

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