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Should you start a business with your family?

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    Melissa Tredinnick

    Melissa Tredinnick UKBF Regular Staff Member

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    They say you should never work with children or animals. But, according to some business owners, there’s a third rule when it comes to working relationships – don’t go into business with your relatives.

    It’s easy to see how working with family could go wrong. Making major business decisions or resolving disagreements often requires a certain level of professional detachment that’s hard to maintain with your child, parent or sibling, especially if that’s someone you live with.

    Falling out with a business partner is stressful enough on its own, but combining that with a family row could have disastrous consequences on both your work and personal life.

    And with many families now spending extra time in each other’s company as a result of social distancing measures, managing the balance between your personal and professional relationships is more important than ever.

    That said, there are plus sides to running a family business – and it’s no coincidence that family-owned businesses reportedly make up 85% of all private sector firms in the UK. 

    In the best cases, the strong bonds between family members can make for a formidable team, giving everyone a good reason to work hard on making the business a success.

    Know your responsibilities

    Employing anybody comes with several new responsibilities, and these don’t get any less complex just because your new recruit is a family member. If anything, there’s often more to think about when it comes to tax and compliance.

    The good news is that employing your spouse or civil partner means you can take advantage of any lower tax rates and personal allowances they have, and potentially reduce your overall household tax bill.

    But this comes with some caveats. They have to do real work at a commercial wages rate, for example, and cannot receive special treatment in terms of pay and working hours just because they’re family. 

    If you’re thinking of employing one of your children, be aware of the working time regulations and insurance requirements that apply if they’re under the age of 16. You should be able to find more information about this on your local council’s website.

    The national minimum wage does not apply to family members who live in the family home and who work in the business, but it does apply if they live outside of your home.

    If they earn more than the “lower earnings limit” for national insurance, which is currently £120 a week, £520 a month or £6,240 a year, you’ll be required to register as an employer with HMRC and complete PAYE records and annual returns.

    You’ll also be required to pay employer’s national insurance contributions as you would with any other employee if their pay exceeds the threshold, as well as checking whether you’re required to provide a workplace pension scheme under auto-enrolment.

    Define job roles

    In response to a thread posted last month in which a user asked for advice on employing his daughter, UKBF user Porky warned about the dangers of family relationships affecting productivity in the workplace:

    “My fear for you is after a couple of weeks she gets bored or distracted, the ‘dad won’t mind’ attitude creeps in, and the job won’t be taken seriously. 

    “I know my own daughter would take full advantage of a situation like that, which is why I wouldn't recruit her in my own company. She would run rings round me.”

    It’s tempting when you’re starting a business with a family member to skip some of the formalities that are normally involved in professional relationships, but this can all too often lead to awkward situations if things don’t go as planned, or if you feel the work isn’t being shared fairly.

    To avoid this, it’s essential to make sure everyone’s roles and responsibilities are clearly defined from the start. This means putting each person’s role in writing, and drawing up a contract that defines what’s expected of them.

    You should also have a formal plan in case things don’t work out, or anyone in the business decides it’s not for them. If you’ve taken on family members as staff, this could be a probation or trial period, after which you’ll assess how things are going and decide whether or not to keep them on. If you’re working in partnership with your family, make sure you have an agreement in place that sets out the steps to take if someone leaves.

    Responding to the thread mentioned above, ExoPaul said:

    “Nothing wrong with working with family if you already get along. Just make it clear it is your business and she works for you, and it should be fine.

    “If she slacks off, is on her phone all the time, or your workload is not reduced then tell her she needs to look for another job.

    “If she works hard, learns the business, and has some good ideas, she might become a valuable asset and someone you can trust a lot more than a stranger in a similar role.” 

    Set some boundaries

    Maintaining a healthy work/life balance can be hard when you’re around the same people at work as you are at home. 

    Setting ground rules about when you work and when you have free time should help make it easier to leave the office behind – even if your office is your spare room.

    If you live and work together, it’s a good idea to make a point of defining specific working hours and proper breaks, and stick to them if you can. 

    As any small business owner knows, it might not be realistic to restrict your working hours to the old nine-to-five, but make sure you set aside some family time that’s separate from work – a ‘no work chat’ rule between certain times in the evenings might be a good option.

    Is a family business right for you?

    Every family situation is different, so think realistically about the strengths, skills and experience each person brings to the team, and how well you’re all able to work together.

    It’s also important to be clear about where you see the business going in the future. As your family grows older how will your business grow with it? 

    If your children are in their teens or young adulthood, for example, how do they see their own careers developing? Are they keen to be a part of the business in the long-term, or would they be more interested in going to university, moving away, or working for another company?

    If you don’t think it’s likely to work out, be honest about it – it might be an awkward conversation to have, but the legal and financial complications of a business gone wrong are far harder to recover from.

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  2. The Byre

    The Byre UKBF Legend Full Member

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    The family business is a long-established business model in many European industries, ranging from the local plumber, all the way through to giant corporations. However, the established wisdom is for the younger members of the family to go away, study or learn a relevant trade and then work away from the family business and then return much later with a wealth of knowledge and experience under their belt.
     
    Posted: Sep 23, 2020 By: The Byre Member since: Aug 13, 2013
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  3. Awinner2

    Awinner2 UKBF Regular Free Member

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    Not just the European industries family based but also the Asians kicked out of Africa by Idi Amin. I had long term business relationships with many of them that arrived in the UK and started their corner shops, fully staffed by family members. As the young ones left education they took on the next shop and the business expanded. Some went into the cash n carry trades too. However many of the older generation told me that their kids did not want to join the family business and went off to university to become doctors, dentists, lawyers, and other professions. But were all part of the work ethic promoted by their elders.
     
    Last edited: Sep 23, 2020
    Posted: Sep 23, 2020 By: Awinner2 Member since: Aug 4, 2017
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