On behalf of Kadish & Associates Law Group posted in Business Formation & Transactions on Thursday, September 28, 2017.
Opening a family business is something that can be fun; however, you need to make sure that you cover your bases for the operations of the business. Having an operating agreement might not be something that you think you need, but it is a good idea for all family businesses.
An operating agreement is necessary in these cases because it can help to keep the focus of the business constant as the business goes through normal cycles of ups and downs. It also outlines a host of other points that are very important.
Since the business is family owned, you need to include succession plans and similar points in the agreement. This lets other family members know without a doubt what will happen if someone with a stake in the business chooses to walk away or passes away. It can take some of the uncertainty out of the business.
You can also use this agreement to outline what each party’s responsibilities are for the business. This can include the financial and normal operating duties. You can include information about how profits will be split between owners and who is responsible for covering liabilities.
Even though your business is a family business, you need to take the time to think carefully about how you are going to split the family life apart from the business aspect. Determining this now and having a clearly defined operating agreement can help you to put up a clear boundary. This helps you to protect your family life and your business since what happens in one shouldn’t impact what happens in the other.
Source: FindLaw, “Do Family Businesses Need an Operating Agreement?,” Christopher Coble, Esq., accessed Sep. 28, 2017