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To form a business with your family in New York may sound like a solid plan in the beginning. After all, few understand your motivations and goals the same way that your family members do. You may expect fewer disputes and more collaboration than in a business that doesn’t include family members. When family members enter into a business venture, they may think that they can handle any business disagreement.

This is only true until it is not. The family bond does not always triumph. Any business venture, regardless of whether the parties are family members, needs a strong written contractual foundation, which has been fully negotiated and with respect to which each of the parties has been represented by their own counsel.

Why family businesses struggle in particular

Most business partners struggle occasionally. When it comes to an equal partnership, internal disputes can happen. This does not mean that it is the end of the business, but it does mean that each partner must protect his or her own interests.

If you take business disputes at face value, family businesses look exactly like any other business. The disagreements may include:

  • Disagreements over job responsibilities and the adequacy of compensation
  • Disagreements about risk-taking strategies
  • The assignment of responsibility for business mistakes
  • Disagreements over future leadership

What can make a family business more volatile is that emotions can go unchecked. When family members fight, the results can be corrosive, especially if the parties have not established in writing at the outset the method for dealing with a particular type of dispute or disputes in general. Whenever a dispute arises, you may feel betrayed by a loved one. Disagreements that go unchecked can destroy a family business. They can destroy trust.

How families can recover and move forward

There are a variety of ways to save your business and limit the damage to your family relationships. First, think beyond short-term goals. Yes, your first instinct may be to prevail in the dispute at any cost.  But you also need to take into account the long-term success of the business and the preservation of a healthy family dynamic. Negotiations between two family members can be more effective if neither makes it his or her goal to completely vanquish the other. If the parties are unable to negotiate a successful resolution of the dispute by themselves, then resorting to mediation or another type of dispute resolution is generally a better next step than resorting directly to litigation.

Ultimately, the key to the successful resolution of disputes, or avoiding them in the first instance, is to have a well drafted set of corporate agreements that clearly articulate the rights and responsibilities of all parties and an agreed methodology for the resolution of disputes.

And, when there do happen to be disputes, family relationships are best preserved if all involved are able to conclude that the resolution of the dispute in question has been accomplished in a manner consistent with the agreements that the family members put in place when they launched their business venture.