Some of the most successful businesses in New York started out as small family-owned businesses. With the growth of these businesses comes changes, and unfortunately, there are some occasions when these changes in the business, either in the control or direction of the business, result in misunderstandings or worse, bitter disagreements. It is because of the long-standing, close emotional bonds, that when there is a change, it can be viewed as a betrayal or violation of trust. As a result, a family-owned business dispute may result in drawn-out, ugly conflicts that can damage the relationships between the family members and the business itself. Conflict within the family business can harm management’s focus and lead to poor business decisions. Early intervention by a seasoned and experienced attorney, can help diffuse the tensions, salvage family relationships and maintain a profitable business when disputes arise in a family business.
Discuss Your Case with a Family-Owned Business Dispute Lawyer
If you’re part of a family business experiencing conflict, it’s important to reach out to an attorney as soon as possible. The attorneys at Woods Lonergan have successfully handled many complex, valuable business disputes between family members for many years; and can help you understand your rights and obligations. We can also help you pursue mediation to resolve the conflict. Our trial-ready attorneys are prepared to litigate. Contact Woods Lonergan today to schedule your free initial consultation.
Family-Owned Businesses Face Unique Challenges
Conflict arises in every type of business or corporate environment. However, when the managers and employees are family members, the familial relationship adds another layer of potential conflict. Disputes within the family could be brought into the business and vice versa.
Family businesses are an extension of family relationships, and disputes can arise within the business when the family relationship begins to break down. Family relationships have the potential to serve the business’s interests or undermine them to a significant degree. Conflict and disputes within family businesses can strike a fatal blow to an otherwise healthy business when not addressed adequately.
Examples of Family-Owned Business Disputes
In a family business, role separation becomes more challenging. For example, if the mother owns and manages the business, she may be addressing one of her children and talking to her employee. The mother or father who runs the company may have different expectations for adult children who are employees of the family business. One of the adult children may become frustrated with perceived unfair treatment in the workplace. Other common types of family-owned business disputes involve the following:
- Disputes over the direction of the family business
- Disputes related to hiring and firing employees
- Disputes related to each family member’s pay and benefits
- Disputes related to who should succeed as the owner of the business
- Conflicts that arise due to divorce of family members who are employees
- Parents hesitating to give control of the business to the next generation
- Disputes related to ownership rights
- Disputes regarding the appointment of trustees
- Disputes related to the sale of business interests to family members or non-family members
New York Laws Family Laws That May Influence Business Disputes
In addition to contract law, family laws also influence the outcome of disputes within family-owned businesses. Laws related to the family’s relationships can affect the outcome of business disputes between family members. Specifically, New York’s divorce and inheritance laws are essential in many family business disputes. For example, suppose a married couple co-owns a family business. If they get divorced, the divorce will significantly impact the business.
The break up of two legal entities—the marriage and the family business—can lead to disputes. In many cases, the divorce will result in the exit of one or both parties from the business. Furthermore, in most cases, the party’s rights won’t be identical, and determining how to continue making decisions for the business can be challenging.
During the divorce process, it may be unclear how the business will be divided between the spouses, making it difficult for management to make strategic decisions. If you own a family business and are considering getting divorced, we recommend reaching out to an attorney as soon as possible. An attorney can help you understand your legal options while protecting you and your business.
Disputes Related to Employment Terms and Conditions
Many family business disputes involve a breach of contract line. When family members are together, they may be less inclined to formalize their agreement in writing because they trust each other. Many family businesses employ numerous family members and expect that employment will always continue in the future.
It’s wise for the parties to put the employment terms of family members in writing to avoid the potential application of the statute of fraud should an employee leave in the future. Family businesses benefit from written human resources policies that outline human resources procedures. When hiring a family member, creating an employment agreement that includes specific details regarding pay, vacation time, and a severance package can help defuse potential disputes.
Dispute Resolution for a Family-owned Business in Conflict
Depending on the circumstances, resolving a family-owned business dispute may be possible before it results in litigation. At Woods Lonergan, our business attorneys have guided many family-owned business entities through many disputes and conflicts. We try to help family members voice their frustrations while guiding them towards conflict resolution. For example, you may be able to work with a third-party mediator who will help the parties involved. In addition to avoiding costly litigation that could harm your business’s profitability, making a good faith effort to resolve the dispute can also help you preserve familial relationships.
Disputes Can Lead to Litigation or Property Division
The attorneys at Woods Lonergan understand that resolving disputes within a family business isn’t always possible. In some cases, litigation may become necessary. Depending on the facts in the case, you may have a claim for breach of contract or violation of one of New York’s wage-and-hour laws.
The dispute may be significant enough that the parties consider breaking up the business. Breaking up a family business brings a unique set of challenges, including properly valuing a portion of your business to divide it between the family members. The attorneys at Woods Lonergan can help you understand your options and advocate for the best outcome possible.
Contact an Experienced Family-owned Business Attorney in New York City
Family business disputes are unique in many ways. They often involve multiple law areas, including family and contract law. One of the best ways to prevent family business conflicts is to create a thorough business succession plan before a dispute arises. Contact the skilled business attorneys at Woods Lonergan today to schedule an initial consultation if you are facing a family business dispute.
Woods Lonergan PLLC helps clients with family-owned business dispute cases throughout NYC including the boroughs of Manhattan and Brooklyn.