Before doing business with family

Business partners should consider the following what ifs, even if they think they know each other well. Include these details in the shareholder or partnership agreement, says David Shlagbaum, a Toronto family business lawyer.

WHAT IF: one partner dies? Have insurance, so the other partner has the ability to buy out the deceased’s business and move on.

WHAT IF: you don’t like working together? Include a buy/sell option in the agreement so if the parties have stopped talking, one of them can initiate a business divorce. That partner can go to the other and say, “Here is the price of the shares and you either buy me out, or I buy you out.” The partner could have, for instance, 30 days to decide if he wants to buy or sell. This way, they’re forced to set a reasonable price because if one winds up as the seller, he could end up with the short end of the stick.

WHAT IF: one partner becomes disabled? Decide whether he can draw a salary while he recovers. Also, you may need to bring in a replacement to keep the business going, so consider the additional salary costs. And if the partner is on disability for the long term, consider the option of buying him out.

WHAT IF: you separate or divorce? For business partners who are also married, consider what will happen should you split in your personal lives. Assess your individual net worths and decide whether one will buy the other out. Include these details in your marriage contract as well.

5 TIPS FOR WORKING WITH FAMILY MEMBERS

Rosemary Smyth, a Victoria-based coach with Rosemary Smyth & Associates provides these five tips.

• Draw up a written agreement of roles and responsibilities.
• Discuss pay, hours, vacation and performance reviews before they are hired.
• Give them adequate training.
• Set boundaries around talking about work after hours.
• Be professional, respectful and appropriate at work.