Subscribe
Share
Share
Embed
OK at Work, hosted by Offit Kurman attorneys Russell Berger and Sarah Sawyer, is a weekly podcast that discusses current events and legal issues impacting business owners. From updates on the ever-changing employment law landscape to the risks and benefits of integrating AI into your workplace, subscribe to stay up-to-date on issues and events that may impact you and your business.
Sarah Sawyer: Welcome to this week's
OK at Work with myself, Sarah Sawyer,
my colleague Russell Berger, both
attorneys at Offit Kurman, and today we
are talking about business relationships
in the context of family members,
significant others doing business with
people who you might have a heightened
sense of trust with to begin with.
So a lot of times obviously especially
in middle market owner ran and operated
businesses and in that space, there
might be a lot of situations where
you're in business with a family member,
whether it be, a spouse or a girl, or
a boyfriend, or nieces and nephews,
brothers, sisters, kids because it can
be a good thing in some circumstances,
obviously to have a family business.
It's a really common practice in a lot
of industries and in a lot of businesses.
However, that means you might
be coming in a little blind.
Having some more blind spots and
some issues 'cause you've already
got this heightened sense of trust
and their family and there's loyalty.
But as anyone who is listening, who has
a family knows, sometimes things can
go awry or there might be disagreements
or there might be challenges, and
sometimes that's even more challenging
as it relates to your family versus
an employee who you're not related to.
So what are some things that business
owners should be thinking about
Russell as it relates to this kind
of category of business relationship?
Russell Berger: Yeah, when We talk
about family of business, I think,
the problem that creates is when, the
balance between family and business
gets outta whack and it becomes
more about family than the business.
And not to say that shouldn't have
family interactions in a business
setting at all, far from it.
But what you need to remember if you
do, is that it's still a business.
It's still subject to a bunch
of rules and risks and laws.
And there still needs to be governance
and control in the business setting.
And I think whether it's a family member
or not, I think that's an important
thing to get on the same page with.
If you're gonna have partners, at an
ownership level, you're gonna have
partners or co-owners in the business.
We all agree, we should probably
have some good ground rules for how
we're gonna resolve disputes and what
our vision is for this organization.
And you know what?
Once we do it, we should put an operating
agreement together that says all that.
And it says if we don't agree this
is how we're gonna resolve it, or
if someone wants to leave, this
is how we're gonna buy them out.
You can solve a lot of problems upfront
before there's a disagreement and when
everyone's pleasant and agreeable and
particularly in a family business, if
you can do that and then in a way that
gets you most of the way there, you save
a lot of acrimony and hardship to it.
We would say this to a business,
any business owner that takes
on, co-owners that, it's best
to have an operating agreement.
It's best to spell this stuff out.
It's just better business.
It's more efficient.
But it's also better, emotionally to
have an off ramp that's well-defined
so the fight doesn't spiral out.
And then I think it's something very
similar when you're hiring, there are
some laws that allow you to hire your
children and not necessarily pay them
the way you would pay any other employee.
But it doesn't apply to everyone who
could be Sarah as you define, broadly,
like family could meet a lot of different
things and there aren't exceptions are
written into the law for all of them.
And you might think your risk
is low, like this is family.
They're not gonna sue me,
they're happy to get some money
and pay 'em under the table.
And, for a few odd jobs here
and there like maybe that's a
perfectly reasonable risk to take.
But when you're really employing
someone and they're really working in
the business and maybe even developing
a sense of ownership mentality
because they see it as the family
business, even if they're not an owner.
It's really important to be clear and
upfront about what this isn't, how
we're doing it, how we're complying
with the law, what steps we're taking.
I think those are all really important
conversations to have and if appropriate
agreements to put in place upfront.
Sarah Sawyer: Yeah, I think from an
operations perspective as well, if you've
got a mix of family and folks who are
not family operating the business having
these things in place can also have a
practical impact around making sure that
people know their lane just like any other
employees, job descriptions, understanding
what their roles are, and that can be
helpful in the day-to-day operation to
avoid conflict and challenges that any
normal human might have, regardless
if they're your family member or not.
And also maybe help if you are employing
other people that are not family
members, that everyone has a good
idea of how everyone's operating, what
people's roles are, you prevent any
resentment that might happen between
those kind of groups of people will say.
And it's also a good just
housekeeping item as well.
This is another context I see has
come up in, is when a business goes
to sell and they've got a bunch of
employees who maybe are subject to
restrictive covenants and confidentiality
and all of these things around the
secret sauce or whatever it might be.
And then we have a couple family
employees who haven't signed anything.
Right.
So, and they might be key to the business.
And so it's just good from just an
operations and housekeeping aspect
as well, to be thinking about
those things, even when they feel
carved out in your mind as separate
because they are family members.
So that's another area, I see it often.
Russell Berger: Yeah.
And one thing to pull out what you
said that I thought was a really good
point is I think you said role clarity.
Which I think is great.
I mean, Obviously again, I think it's
great for any business to be clear about
who's doing what, what are the workflows,
how do these departments work together?
But the more you can plainly state
that, calmly, objectively not,
there's not a lot of emotion.
Like, This is your job, this is your
job, this is how you work together.
The more you can do that, the
easier it gets to manage people.
And particularly when those
people are family members it can
help to deescalate the tensions.
Sarah Sawyer: Okay.
Well thanks Russell.
We'll see you next time.
Russell Berger: Thanks, Sarah.