2020-09-02
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Mixing business and family - a recipe for disaster?

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Posted by Robert Lee on 12 March 2020

Robert Lee - Head of Corporate Law
Robert Lee Partner - Head of Corporate

The UK has 4.8 million family businesses – 88% percent of all businesses in the UK – big brands such as Dyson, Warburtons and Specsavers are but a few that spring to mind. While the majority are small businesses, over 17,000 are medium and large companies.

More than one in ten large companies are family owned, and nearly half of all medium-sized businesses. Family run businesses make up over 90% of all private sector firms, they employ 12.2 million people, almost half of all private sector employment.

These family-led businesses are essential to the British economy. However, it’s not always plain sailing, and many people have concerns about starting a business with a family member and perhaps rightly so, as disputes in family businesses are often more fraught than those in public companies.

In a poll released by YouGov 53% of adults in the UK said they wouldn’t consider going into business with a member of their family. Thirteen per cent of people surveyed said they’d be concerned that business conflicts could cause irreconcilable issues across their immediate and wider family. A further sixty-four per cent said they thought merging business and family life would be too complicated.

However, not everyone agreed. In fact, 44% of respondents stated they would happily start a business with a family member, the overwhelming reason being they feel they can trust their family members implicitly.

The survey, which was carried out YouGov on behalf of Shulmans LLP also revealed the one person respondents felt most comfortable going into business with was their spouse. This approach of spouses running companies has proven to be successful for many couples who are also business partners including the founders of both Jo Malone and Go Ape who have reaped the financial rewards of their family business.

The survey also highlighted that couples who were living together were less likely to want to start a business as a couple than those who are married or in a civil partnership. The question wasn’t asked, but you could speculate that this is because married couples already have a legal contract between them, so a business arrangement is not seen as such a huge step.

Almost forty per cent of people who stated they would go into business with a member of their family said it was because they felt they could resolve any arguments quickly, this is despite the fact fifty-seven per cent of people admitted to arguing with their family members, particularly over finances.

Robert Lee, a Corporate Lawyer, comments “This is really interesting research from YouGov and Shulmans LLP and backs up the advice we give to our clients. There’s no doubt; there are many advantages of entering into a business arrangement with a member of your family, trust being a key one. However, this is also the reason you should make sure you protect your future business and yourself by seeking legal advice to put the right measures in place.”

“Regardless of how close your family are, disputes and disagreements do arise. It can be a family issue which muddies the waters of the business arrangement or vice versa. In these cases, the disputes can be more complicated as there are so many emotions and family members involved.”

Tags: Corporate

About the author

Robert Lee

Partner - Head of Corporate

Robert specialises in mergers and acquisitions, and corporate restructuring.

Robert Lee

Robert specialises in mergers and acquisitions, and corporate restructuring.

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