Running a small family business can be far more difficult than most people could ever imagine. The unfortunate truth is that a lot of family business owners do not understand the laws surrounding their business. In return, there is a possibility that they’re going to find themselves in a legal nightmare at some point in the future. What are some of the biggest legal mistakes that family businesses are making in this day and age? You’ll find out in the comprehensive guide below.


Mixing Personal and Family Business Finances

Business owners need to realize that it is a terrible idea to mix their finances. Before you start a family business, you should make sure that you’re going to be able to separate your family and business finances.

Moreover, in the US, you should designate the business as an LLC. (LLC stands for “limited liability company.”) This provides the business owner with greater protection. Additionally, it decreases the owner’s tax liabilities. If you are not sure about how to register your business as an LLC, a good experienced family law lawyer can help.

It is also a good idea to have two separate bank accounts. You should have an account for your personal finances and an account for your business finances. If you do not, there is a chance that you’re going to run into family legal issues if your business fails.




Employment Agreements

It is undoubtedly true that it will be incredibly difficult to fire a family member. Nevertheless, there is a possibility that you might need to do that at some point in the future. With this in mind, you need to make sure that you have employment agreements with every single member of the family.

What’s more, you need to ensure that the agreements contain key information such as what will happen if someone calls in sick too many times as well as wage details. Get these details out of the way early on and make sure that they’re put in writing.



It would be downright crazy to operate a business without a license. Nevertheless, a lot of family businesses are doing just that. This could very well get you into hot water at some point in the future. After all, you are most likely required by state and federal laws to have a license. Almost every single type of business out there needs a license. This includes plumbers, exterminators and more. If you do not have a license, you should begin taking steps to get one as quickly as possible. If you don’t, you’ll regret your decision before long.


Not Having a Succession Plan

Finally, you need to make sure that you have a succession plan. After all, anything can happen, and you need to be prepared. For example, you need to know what is going to happen in the event that you are forced to retire early or if you become ill. Make sure that you know who is going to take over your role. Otherwise, there is a good chance that everyone is going to be fighting for that spot. Don’t let that happen! Prepare today so you can avoid problems in the future.