A family business is often one of the most important assets in a relationship or a family because it is the income generator as well as having capital value.
With more people currently losing jobs, facing redundancy or seeking an improved work-life balance, we are likely to see more new businesses being established.
When launching a new venture, it is vital that all parties protect their interests.
Alison Fernandes, Partner and head of family law specialists Hall Brown’s Sheffield office explains why and suggests how this can be done:
1. Consider making provisions
Whether your business will be multi-generational or involving a partner or other family member, consider whether any family law provisions are needed.
If you are setting up a limited company, you will need articles and memorandum of association and a good business plan but consider a shareholders’ agreement too.
If you are involving your other half or other family members, you need to think about what might happen if relationships break down or people want to leave the business.
This is where setting up a shareholders’ agreement can help and you can make provision for different eventualities.
2. Set up a shareholders’ agreement
A shareholders’ agreement will normally deal with what happens if there is a dispute or someone wants to leave.
It can outline what the formula would be for purchasing another person’s share and what would happen in the event of a death or even family breakdown between shareholders.
3. Take professional advice
There are advantages to including your spouse or partner in your business, such as tax reasons.
While taking guidance from your accountant or bank might seem obvious, also think about speaking to a family lawyer.
At Hall Brown, we are used to working with owners of businesses of all sizes, so can offer relevant, practical advice.
Our latest recruit is Martin Loxley, one of South Yorkshire’s most experienced and familiar family lawyers, and someone who has worked with many of the region’s leading businessmen and women.
4. Think positively
It’s quite possible that we will see more businesses being established over the coming weeks and months, be they sole traders, partnerships or limited companies.
A shareholders’ agreement covers the good things too: what the expectations are for dividends, future share allocations and restrictions on who future shares can be sold or given to.
5. Act as soon as possible
The earlier you get advice the better. Although it’s best before you establish the business, you can speak to a family lawyer if your company is already operational.
In particular, consider making an appointment to see a family lawyer if cracks start to show in your relationship.
If those involved aren’t able to overcome their problems, a shareholders’ agreement could provide security by making sure that everyone knows their respective position.
6. Remember: it is never too late
A shareholders’ agreement can be made at any stage.
Sometimes, a couple might separate but agree that the family business will still continue with both parties remaining as shareholders.
They might not have had a shareholders’ agreement in the past, but, because they are separating, they now need extra clarity.
If a relationship breaks down and there is no shareholders’ agreement in place, you can still take advice from a firm such as Hall Brown.
The future of a business can be included in discussions about a couple’s entire marital assets.
Getting the right advice can help protect it and the income it can provide for the future.
To find out more visit www.hallbrown.co.uk, call 0114 5534570 or email alison.fernandes@hallbrown.co.uk.
