By: Christian J. Schulte- Published in the BizWest Thought Leaders column in January 2018
As a litigator in a business law firm, I have seen the best and worst of family businesses. When they work, they work great, for intuitive reasons: family know and trust each other, they share values, they want to maintain a generational tradition. But when they sour, they are horrible. Family business dissolutions are like divorces: parties supposedly fighting over fair asset division are really fighting over hurt feelings and deeper family conflicts.
This Forbes article: https://www.forbes.com/sites/nextavenue/2017/03/08/how-family-businesses-can-set-workfamily-boundaries/#13f6abc62a80 is worth reading. The authors do not, however, mention that legal advice is essential too.
During formation, your attorney will consider things you might not. For instance, you may not think that a sibling, spouse, or child might leave the business, because of new interests, divorce, or an untimely death. Does your business have a buyout provision that lets someone separate without crippling the business? Is your agreement fair to the heirs of a deceased partner? Your attorney can help you make conscious decisions about these issues, instead of leaving them to spring up during a crisis. Hopefully, this makes litigation less likely.
When are falling apart, however, you should consult a litigator early. A litigator such as myself would give you a sense how much litigation can cost and your likelihood of prevailing, but more importantly would help you think about your case dispassionately. Family members may try to “guilt-trip” you into an unfair settlement, or you might be taking an untenable stance motivated by non-business considerations. Regardless, your litigator’s goal should be to help you stop and think, Is this really what you want to do?
Ultimately, whether you want to pursue settlement or a full lawsuit, your litigator’s job is to help you carry out your decision. But that decision should be your informed decision, not an unfortunate gut reaction.