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When siblings don’t make good business partners

Sometimes, siblings decide to start a business together because they assume that their pre-existing relationship reduces some of the risk inherent in a new business enterprise. Other times, siblings might jointly inherit a business from the estate of a parent or grandparent.

Oftentimes, siblings and family members work well together because they already understand each other’s personalities and abilities. However, sometimes the opposite is true as well. A pre-existing relationship can exacerbate the stress of running a business together.

People may think very little of misconduct if the people affected are family members, not business partners and strangers who they may view as more likely to take legal action. The unfortunate reality is that sometimes siblings and other family members running businesses together learn the hard way that they are not good business partners.

A buyout may be the best solution

Barring a scenario that involves egregious misconduct, such as theft from the company, the best solution for a challenging scenario involving family business ownership might be a buyout. Some people refer to a buyout as a business divorce, as it involves ending a business partnership and appropriately addressing shared business resources.

A buyout can be complicated, as people have to determine what the company is worth and how much of that value in theory belongs to each owner. Even someone who does not particularly enjoy working at the family business may want to hold on to their ownership interest because it represents both an interest in the company’s overall value and a source of future income.

Those proposing a buyout often need to plan carefully. Making an initial offer that is both reasonable and that provides room for negotiations is of the utmost importance in most scenarios. A partner receiving a buyout proposal is likely to counter the initial offer by demanding more money or a longer transition during which they may continue receiving their salary and benefits.

Making an offer that is generous enough to not be offensive while simultaneously giving the executive hoping to retain the company room to compromise is valuable in such scenarios. Occasionally, amicably settling a buyout simply isn’t possible. It may sometimes be necessary to take the matter to civil court. If the matter does go to court, factors ranging from the misconduct of one partner to the terms of the existing partnership agreement can influence how the courts rule.

Proposing a buyout can lead to short-term hostility but may ultimately help preserve a family relationship that could be at risk due to the stress of running a business together. A buyout can potentially preserve relationships and can also help protect the company from the incompetence or misconduct of one or more partners.