There are many advantages in operating a family business on Long Island. However, these dynamics can also present some unique challenges. When conflicts arise in a family business, it’s not only personal relationships that are at risk — business relationships are in jeopardy as well. Whether you are operating a startup or a large corporation with family members, it’s important to understand the common issues that can occur and the legal solutions that can be implemented to help protect the longevity of your company.
Common Conflicts in Family Businesses
There are many reasons conflicts can occur in Long Island family businesses. They may stem from breakdowns in communication, disagreements regarding decision-making, financial matters, resource allocation, hiring practices, or the general direction of the company. Disputes can also arise when family members have differing values or objectives for the business.
Other common reasons family business disputes can happen include the following:
- Compensation disputes — If family members feel compensation is unfair, or some members contribute more to the company than others, tension can escalate. Disputes can arise if these issues are left unaddressed.
- Ownership issues — Disputes between members regarding ownership or equity distribution can arise in family businesses, particularly if some family members believe they may be entitled to a greater share.
- Ambiguity about roles — When the roles and responsibilities of members are not clearly defined, there can be misunderstandings and power struggles.
- Succession planning — Without a clear succession plan, disagreements can occur regarding leadership roles and the future of the business.
- Breach of fiduciary duty — Conflicts can arise in a family business when a family member places their own interests above those of the company, violating their fiduciary duties.
- Personal differences — Sometimes, family business disputes are not legal in nature and can simply stem from sibling rivalry and other feuds.
Family business conflicts can impact decision-making, affect day-to-day operations, and create a toxic work environment that affects both family members involved in the business and other employees. To ensure the success of your company, it’s vital to communicate openly and honestly — and seek viable remedies for any disputes before the business is harmed.
Legal Solutions in Family Business Disputes
Due to the dynamics and emotions involved, family business disputes can often be contentious, and it’s best to take action to prevent them before they can arise. No matter how well family members get along, it’s crucial to have the necessary agreements and legal documents in place to outline expectations, provide clarity, and ensure everyone is on the same page. These can include a family business charter, employment agreements, shareholder agreements, and corporate governance documents. Holding regular meetings and emphasizing communication can also prevent misunderstandings and encourage transparency.
Even when proactive measures are taken, family business disputes can still arise. When family members cannot reach a resolution, it’s essential to avoid further damage to the company — or family relationships. Mediation is an effective form of alternative dispute resolution that can help ensure business conflicts are resolved cost-effectively, privately, and amicably. It also offers flexibility and can help the parties find creative solutions that might not be available in the courtroom, while allowing them to remain in control of the outcome of their case.
It’s always best for family members to attempt to resolve a family business dispute among themselves. However, if a conflict cannot be resolved outside the courtroom, it may be necessary to proceed to litigation. A skillful business dispute attorney can evaluate your specific situation and advise you regarding the best course of action.
Contact an Experienced Long Island Business Dispute Attorney
Conflict between family members can have a detrimental impact on your business and its operations. Having a knowledgeable business dispute attorney by your side can help ensure your interests are safeguarded. At Barnes & Barnes, P.C., we represent clients in a variety of family business disputes and work to obtain positive results in every case. Contact us at (516) 673-0674 to schedule a consultation.
