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Whether you are dealing with a lawsuit or a complicated legal challenge, facing the California legal system can be a time-consuming, stressful - and, if you own a business, costly - experience. Let the knowledgeable and seasoned…

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Corporate Law Blog Post

Handling Disputes in Your Family Business

California Cart Builder, a family business which specializes in producing custom-made food trucks is thriving. From its humble beginnings in 2000, the company, which was started from scratch by Rodney Eaton, now counts three of his children among its 13 employees. This year, the Lake Elsinore business is due to see 30 percent year-on-year growth, with revenues likely to exceed the $3 million mark. So far, there are no signs of disharmony in this venture’s success story. However, other family businesses have not been so fortunate.

Where such disputes arise, the danger is that these will affect the business itself, putting your investment in jeopardy. To minimize the impact of family business disputes, consider implementing the following arrangements:

Ownership Agreements

Shareholder agreements, partnership agreements or similar agreements are crucial for regulating issues affecting the day to day operation of the business, minimizing disruption where obstacles arise. Consider including provisions which clarify how to deal with difficult situations, such as removing someone from the enterprise’s management or determining ownership where one party quits.

Employment Contracts

Written contracts are highly recommended to regulate relationships in a family business. Set down employer and employee rights and duties formally and clearly so they are separate from personal connections. This allows both sides to know what to expect from the other

Business Financing Arrangements

In the absence of a bank loan, consider a loan from a family member making sure that it is documented in writing and repaid in regular installments in the same way as a formal loan. Alternatively, approach an outside finance organization to ensure that business and personal relationships remain separate.

To minimize the risk to your business, consider resolving a family business dispute with the expertise of an experienced corporate attorney. Your attorney can act as a mediator to help resolve issues between the parties involved, or help enforce your rights where resolution is not possible.

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Creech Liebow & Kraus
333 West San Carlos Street, Suite 1600
San Jose, California, 95110-2726 USA